Should I buy With or Without a Mortgage

Hi all,

I am hoping to get some advice as I'm not sure what course of action would be best for our family needs!

We sold our property over a year ago and put the money - 170k in the bank.
In our particular area we have seen a massive bubble in house prices, but still prices are massively overflated so we have decided to wait until at least end of 2010, start of 2011 to buy again. (prices have fallen 40% already and there is at lease another 20% to go!!)

We have put the house money in a 1 year bond, tied in until next summer and fixed at nearly 4%, so happy enough at the return, and we are renting a lovely property at below 500pcm, so things have worked out well for us. Good schools and neighbours, lovely garden etc.

We have 2 kids and really only need a 3 bedroom house, although a 4th bedroom would be great to use as a study/gym.

We have never been mortgage free before, but have the option of having no mortgage when we go to buy again.

My husband works and earns 20k, I stay at home and look after the kids although do intend to go back to work when both kids are in primary school, - part time. Mt husband has been the sole wage earner for 4 years now and we have made sacrifices in terms of lifestlye and can well live within our means!

My main question is: should we buy a house at 170k and be mortgage free or a bigger house at 200k and have a 30k mortgage (which we would intend to pay over a 5 year term, due to less interest!).

By the time we will buy I estimate the 170k house to be about 1600sq ft, 4 bedroom and the 200k house to be around 1800-2100sq ft, 4 bedroom.

Buying at the bottomish of the market the price difference would only be 30k, but when house prices go up again, maybe in 10 years, the prices difference would be greater and if need be we would then downsize and give a lump sum to both our kids, to help them in life.

I am a mortgage free wanna be but I'm not sure if I would be missing a trick if I bought the smaller house!

What do you think I should do, any advice would be great!

LH

Comments

  • alfiesmum
    alfiesmum Posts: 1,171 Forumite
    It's a tough one!! I think that once we're mortgage free, it would be HUGE step for us to take on another one. It's personal preference I suppose. Along with being mortgage free, it's important to balance that with the needs of your family too. And as your family is young, you'd probably never regret having a larger house. And mortgage freeeeenesss is not far away at 5 years further down the line.

    alfiesmum
  • Bean_69_99
    Bean_69_99 Posts: 55 Forumite
    is this just a weigh up of the cost of the mortgage against the expected rise in prices?

    a) How much do you expect the 200k house to rise net?
    b) How much interest do you expect to pay on the 30k?

    c) how much will the 170k house have risen net at the same rate as the 200k?

    Take b) from a) and if its greater than c) theres your answer?

    Predicting what gona change is whats plaguing (sp) me in my own house buy thread... luckily your timelines are longer so maybe a little easier and more reliable for the houses to go up...

    Just my thoughts...
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