How much to spend on first house?

bring1t

My partner and I have been looking this week at various houses in our area, 2 bed, terraced, 110-120K. These houses would provide enough space for us, and space for visitors.

We are buying in Stockport, but are originally from the South and would be looking to move back down in about 2-3 years. Our options are:
1. Buy a house and sell when we move.
2. Buy a house, keep house and rent out, buy another one down south.

Along with the above we are seriously thinking about whether we should be looking at spending more money on a house because we can easily get a mortgage for and afford to spend 200k, now just because we can...... should we???

If house prices rise at a certain level, we would make more money on a 200k than on a 120k. sounds sensible.

Family and friends think we should be spending what we can afford because then it sets you up for when you move, has anyone got any opinions that might help in this difficult situation for us.

thanks

cattie

Nobody knows what is going to happen in the world of property in the next 2 or 3 years so really you should just be thinking about you immediate needs & then review things when the time comes to move back down south.

Never overstretch yourself with a mortgage, as believe you me, you never know what nasty old fate may have in store for you just around the corner.:sad: What would happen if one of you were unable to work for whatever reason?

You have to remember your logic of making more on a £200, 000 house than a £120,000 must mean that you can lose more on a £200,000 house if prices drop. If times are hard & negative equity starts hurting people then higher priced properties will be harder to shift.

If you search these boards you will find many people who have bought BTL have sold, or are in the process of selling these properties as the market has become saturated with BTL's. There is no point in having a property to rent out if you can't get tenants for long periods or the rent doesn't even cover the mortgage & upkeep of said rental property.

Careful_girl

I think you have to decide what is right at the moment. Cattie is right about not overstretching yourself. I think I would probably look at what is available. You may find that the cheaper houses do not have what you would like in that the area is not as nice or they don't have a garage. How about trying to find a house which would be good both as a current house and if prices drop that there would be a rental market for. Perhaps you should buy the cheaper one and put the money you save into tip top savings account?Or a bargain buy to let?
I often find that when you start looking at what is available the answer comes from what you see.
Good luck,
CG.

Gorgeous_George

I think you should rent and stash as much money away as possible.

To buy and sell in two years will cost approximately:
£1,000 in solicitor's fees
£2,500 in Estate Agent's fees
£1,000 for the Home Seller's Pack (if it isn't ditched)
£500 for mortgage arrangement fee

Add on a conservative £1,000 for repairs, carpets, curtains etc., and you have spent £6,000 brfore you start paying the mortgage. That's probably about half of your two years rental payments.Rent furnished and you won't need to pay a removal company when you move south.

Worth thinking about.

Best wishes.



GG

BobProperty

My comments in coloured font

rm-lewis wrote:

My partner and I have been looking this week at various houses in our area, 2 bed, terraced, 110-120K. These houses would provide enough space for us, and space for visitors.

We are buying in Stockport, but are originally from the South and would be looking to move back down in about 2-3 years. Our options are:
1. Buy a house and sell when we move.
2. Buy a house, keep house and rent out, buy another one down south.

There's a lot on the market at £119995 because of the stamp duty effect. Which area(s) are you looking at because you need to do your research on what they are like.

Along with the above we are seriously thinking about whether we should be looking at spending more money on a house because we can easily get a mortgage for and afford to spend 200k, now just because we can...... should we???

Ask yourself what you can afford if interest rates go up a point or 2.

If house prices rise at a certain level, we would make more money on a 200k than on a 120k. sounds sensible.

It's called gearing and it works both ways as has been pointed out.

Family and friends think we should be spending what we can afford because then it sets you up for when you move, has anyone got any opinions that might help in this difficult situation for us.

thanks

nrsql

>> whether we should be looking at spending more money on a house because we can easily get a mortgage for and afford to spend 200k, now just because we can

You expect to stay there for 2-3 years so the question really should be what do you want to live in for that time.
Your quality of life is the most important thing and money is just one factor.

You are assuming prices will go up during that period.
Be careful about stretching yourself in case interest rates go up (unless you get a fixed rate).
You will probably want to spend more than you expect on your new home as well as bills/repairs being more than you expect.

bring1t

Thanks for the above guys, in terms of affordability even on a repayment mortgage of 630ish per month i would probably be looking at overpaying about 500 per month and still have some left for savings.

I do think though that starting with a cheap house is a lot less risky. I might even do it on a ten year mortgage to get it out of the way. any difference between doing a ten year or a 25 and overpaying?

stphnstevey

Can you afford the mortgage repayments?

Do you need a 200K house - we currently have 4 beds and use only 2 of them! We didn't really need to spend what we did.

If you used part of the money to buy a BTL, then you can cash in on any equity increase without needing to sell your home or remortgage:

Buy 1x 100K house to live in
Buy 1x 100K house to rent

10yrs later
Living house worth 200K, mortgage 100K
BTL worth 200K, mortgage 100K

Sell BTL and get 100K profit, pay off mortgage of house living in and then have a 200K house with no mortgage!
:j :beer:

PoorDave

stphnstevey wrote:

Can you afford the mortgage repayments?

Do you need a 200K house - we currently have 4 beds and use only 2 of them! We didn't really need to spend what we did.

If you used part of the money to buy a BTL, then you can cash in on any equity increase without needing to sell your home or remortgage:

Buy 1x 100K house to live in
Buy 1x 100K house to rent

10yrs later
Living house worth 200K, mortgage 100K
BTL worth 200K, mortgage 100K

Sell BTL and get 100K profit, pay off mortgage of house living in and then have a 200K house with no mortgage!
:j :beer:

Obviously, the reverse applies with each house being worth 50k after 10 years. Both situations are possibilties

PoorDave

rm-lewis wrote:

Thanks for the above guys, in terms of affordability even on a repayment mortgage of 630ish per month i would probably be looking at overpaying about 500 per month and still have some left for savings.

I do think though that starting with a cheap house is a lot less risky. I might even do it on a ten year mortgage to get it out of the way. any difference between doing a ten year or a 25 and overpaying?

This is the way i thought when i bought my first house. Suffice to say it never happened - the money that would have been the over payments went elsewhere on fun stuff!

Make sure you have enough cash to cover yourself if you unable to work for any reason. Over payments can often be taken back as payment holidays back to the point where the mortgage company have as much of your cash as they would have if you hadn't overpaid, if you see what i mean.

I am sort of in the opposite situation, in that I was born in Stockport, but liv down south. Interested to know what area you're looking at...

stphnstevey

PoorDave wrote:

Obviously, the reverse applies with each house being worth 50k after 10 years. Both situations are possibilties

There is an element of risk in everything we do. Just crossing the road, there is an element of risk. It doesn't stop us crossing the road though.

If you do what everyone else does, you get what everyone else has.

Managed risk.