To buy OR not to buy???

Hi,

I'm a newbie and just after some opinions/advice.

My husband and i brought our first home in 2005 for $115,000. It is only 2 bedrooms (previous owners had knocked an arch way through to the kitchen and turned the 3rd bedroom into a dining room), while they did a good job of this, we did'nt worry about not having a third bedroom at the time due to no children and the rest of the house needed some small renos first. We borrowed an extra $40,000 to consolidate debts, and renos, so this now brings our mortgage balance (as of today) $131,000. Now we are thinking about turning the dining room back into its orignal 3rd bedroom, as we currently have a 2 year old, and plan to have another child in the future.

Our kitchen needs a WHOLE new kitchen - infact its the orginal 1950's kitchen, so i'm sure you can picture what it looks like.

Our back yard is slightly sloped (and small'ish), and hubby wants a double garage, but due to the slope, it would cost us $13,000 for a 6x6 double garage and it would look quite funny/odd to have it only in the position that council has approved for it to go.

As the house stands today, i suggest that we could fetch $190,000 (houses are selling for a little more, but i'm being realistic).
After fees we could end up with $30,000 - $40,000 deposit on a newer home, that gives us a flat leveled back yard, 3 b'rooms and some something nicer.

I would LOVE to have a newer home - hubby is desperate for a new home, BUT i love having a low mortgage too. selling and buying a new home would mean a higher mortgage repayment and less money in our savings ....... BUT i think we have both out grown our home .... can you see my dilemma?.

Please give me your thoughts??

Have you considered a knock-down rebuild on your current block? It'd probably be as or more cost effective as doing major extensions and reno's. Particularly if you like the area and are settled so to speak.

Maybe talk to a financial planner and map out what you want to do and how to get there. But no matter which way you look at it, you are going to need a bigger place with a family of 4.

tend to agree with HuggyB. you haven't mentioned whether you like the location of your current home and whether you'd have to move far to get something newer? if you love where you live go the knockdown re-build

As much as that sounds like a great idea, but don't you have to have a huge amount of equity for this and not too mention borrow more money?.
I'm sorry if i sound a little dumb, but theres alot i have'nt even thought of before.
I don't think knocking our house down and rebuilding is really an option for us as it would not give us more back yard space, or even fix the slopping back yard.

I just thought it would be easier to renovate ie, get our third bedroom back, renovate the kitchen and some landscaping to make the best of what we have, At the end of the day, by doing that, we will still have a cheaper mortgage.

However ....

I'm more worried about putting in an offer for another home (subject to finance, building inspection & the sale of own home) because what if our home does'nt sell quick? Will it then become a bridging loan?. Or do we have a certain amount of time to sell before the vendor decides to pull out of contract?. Do we still need a deposit for the home we put an offer on, even though its subject to the sale of own home?.

We do not plan to put our house on the market UNTIL we see something that we like.

Equity? By your calculations you have ~$25k equity available (for investment loans) and $60k to open a line of credit for reno's.

Before you start looking at houses, go and see the bank and get an idea of what they are willing to lend you, taking into account you may be paying a new mortgage and servicing the existing one (the scenario if you buy and settle on a new house before selling your old one).

Given the relatively low existing mortgage, are you in a position to use the equity to buy a new place and rent the old place out? You'd be looking at ~$200/week in repayments with the current interest rates, what would it rent for in its current state? What would you need to buy a new place? Hard to guage as I'm not sure where you live.....