Is it the right time to move?

Vardagsekonomi Bostad, bolån och boendeekonomi
1

Hi. Apologies for my English, my Swedish is unfortunately still not at a level where I can discuss topics like these freely :slight_smile:

Would like to hear your opinions about our current situation.
We live in an 3:a we bought 3.5 years ago. When buying the apartment, we absolutely maxed our finances. Had 10% saved in cash and borrowed the remaining 5% ( I work in a bank so we got pretty low interest ). We were tired of constantly renting and moving, and thought it was good time to enter the market.
Bought the apartment for 4.7M

Currently together we bring home around 140K before taxes each month. We have around 20k in expenses, another 5k for the private loan, 5k for the car leasing and around 20-25k for the mortgage. We both save individually plus joint account for the kid.
We live pretty comfortably, we don’t struggle, we can afford to both save and travel or buy stuff that we need. We don’t splurge but we have the capacity for it.
We have 150k in cash savings and 250k in the stock market.

We have 10 more months left of the private loan and 11 months left of the car leasing, then we need to pay around 100k if we want to buy off the car ( which we want ). I can close the private loan today and use some of the savings to cover it, but it’s not worth the risk with the low interest rate we have.

Our apartment is amazing, but we know it won’t be our forever home. Because of the fact that we both work partially from home, we feel it’s becoming harder to find space for everything. It’s time to move our kid into a separate room and then what is our office disappears. We could easily do 2-3 more years here with some improvisation . We also want to plan for another kid, ideally next year.

An apartment (4:a) was recently posted for sale in our building. They are asking for 5.1-5.2M.
So now we are thinking. If we sell our apartment now, I am pretty sure it will be with a loss. We’d be happy to sell it for 4.5M. But then again, will we ever be able to sell it with a profit? I don’t think so. We really did buy it at an all time high. Currently it’s valued at 4.4, I really do believe it can go for 4.5 just because of the brf and the location.

I feel like this is an amazing, rare opportunity. The Brf has good financial records, low parking fees, the area is nice with some opportunities for growth ( lots of families ), our son goes in daycare here. It would be perfect for us. I can see ourselves easily living in that apartment for 10 more years. Eventually we want to buy a house.
But is it too risky to go into this all of a sudden?
We have paid off 25% of our current loan, but increasing the loan to 500K more plus selling with a loss would hit us financially, but we would be settled for the next 10 years.
We are struggling to decide. Would love some unbiased advice if possible.
Thank you!

1 gillning
2

Hi and welcome to the forum.

I think in general, it is not a bad time to move up, as the market is pretty slow now.

However, as you say, your finances might be a bit stretched, and a slow market holds some risk in terms of selling your apartment.

As far as I understand, you had 470k equity in the house when you bought it, 4.23M in loan, from which you paid down more than 1M (25%).
(Is it really so? I thought you only need to pay down 3% max, which would add up to approx 400k over 3.5 years. Did you decide to voluntarily pay back more?)
Anyway, I assume you have around 3.2M loan and 400k savings&investments.

Your apartment valuation is 4.4M. The market is very weak now and people who can hold onto the apartment do so, and not sell at a low price. So the real valuation might be lower. For example, my apt is “valued at” around 5.5M, the highest bid I got back in March was around 5.2M, which I didn’t accept then and I didn’t get a reasonable bid since then (great brf, great location). There is a huge oversupply on the market now, so if your apartment valuation is 4.4M, there is a risk that you won’t get more than 4.1-4.2M, especially if you need to sell quickly.

That being said, you have 1.5M in apartment equity and 400k in savings. If you buy the 5.1M apartment with 85% LTV, that needs around 780k equity (4.32M loan), so you would still have 700k+ released from the apartment equity in addition to the 400k savings.

However, you say that you expect to increase the loan only by 500k, why is that? Can’t you increase the loan all the way to 4.3M?

Maybe I got lost in the numbers. But if you have 1.1M savings outside the apartment after you move, I think it can be a good time to move up. The biggest risk is selling before you get access to the new apartment. Many banks condition the loan on selling your apartment by the time you get access to the new place. Maybe try to 1) sell first your apartment, or 2) buy first, but write a purchase contract with a very late move-in date to give you plenty of time to sell, or 3) buy first but write a purchase contract conditioned on financing (i.e. conditioned on you being able to sell your current apartment before the move-in). The first option is the lowest risk, but the apartment you are looking at now might be sold by then.

If I misunderstood your loan situation and you only paid back 400k, your situation is 600k worse, so you would put most of your money in the new apt (and would have 500k before buying the car.) Then I think it is more risky. I would definitely consider selling the current apt first to make sure that I’m not stuck with it or forced to sell at a bad price, and then I would look at what I can buy.

Let me know if I got some of your numbers wrong.

3

Cant see the issue selling at a loss since you’re buying another one that, very likely, has dropped equally, or exponentially even more, since it’s a more expensive/ larger apartment. You’re selling and buying in the same market. However there’s always the cost or real estate broker, styling etc up to maybe 100 k, when selling.