Buy what you can reach or what you can afford?

abaxas

Buy what you need, not what you want.

As wants can change on a whim, needs only on a change in circumstance.

Thrugelmir

Xiderpunk wrote: »

On the surface it comes down to risk, how secure is mister A in his job, what is plan B if it all goes wrong etc etc.

On the basis that interest rates remained at 5 % for the term of the mortgage. Couple B could repay their mortgage in under 11 years by making the same level of repayments as couple A over a 25 year mortgage term.

In financial terms. Couple B would have an additional £491,000 to spend (or even save) as they wished over the 14 years. That's putting aside the increased cost of the more expensive property as well.

(At 7% interest over the term of the mortgage the differential is over £636,000).

Is the more expensive property worth it? If you have to borrow the money and spend your working life paying for it.

chucky

the problem with buying what you need now is that you will more than likely have to move when you probably don't want to.

good planning and good knowledge of what you need is key when buying property - otherwise it could be quite expensive buying what you need now without considering what the future holds for you.

davilown

Its such a difficult question to answer and, this is how we have worked it out for us:

Location - distance to work for both parties, local schools and amenities (8 miles motorway each way, 2 miles to secondary school with good bus links, 2.5 mile to nearest town/supermarket etc), lots of open space, beaches, water and fresh air. Near to relatives but still far enough away for them to ring prior to arrival!

Size - have two kids but debating a third. Buy a house with 3 beds with an 13(DS),11(DD) and 1 would not be suitable thus really looking for a four bed or a house with scope to add/convert. Detatched property is desirable but not essential.

Income - some say that over 25% of income spent on mortgage is a bad thing. If We buy at £270k then mortgage will be x4 joint income which is a lot but, with no other debt to service, just household bills, the mortgage repayment will account for38% of our income. Add into that incremental pay rise over the next 8 years (until we both reach the top of our pay spine) as well as inflationary pay rises (probably not for the next 2-3 years) then it won't feel too bad for long.
On top of this is if we have another kid, can we still afford the repayment plus additional costs involved if the oh goes back p/t? yes, but will have to stop overpaying the mortgage by £300 each month and cut down spending 'cash' from £950pm to £500 pm. We both over pay anyway into pension plans, both work and non work types.

Essentially, everyone's requirements are different and these different needs can be fulfilled by all manner of housing.

Oh, and on top of this, you really should look to buy your home, not an investment, BUT remember whats happens if you realise after a few years that its not for you? You will want to be able to sell it so add that into the equation as well

Really2

abaxas wrote: »

Buy what you need, not what you want.

As wants can change on a whim, needs only on a change in circumstance.

Agree in theory but in principle?

You need a car anyone may do.
But you may want something reliable.

A 1 bed flat may be all a couple need.
But they want to have children and want something bigger to cover the future.

Both those example the want path is more sensible than the nee path.

If you only buy on need your circumstance could change very often and it could work out more expensive in the long run.

mr_fishbulb

Also depends on what is likely to happen to your salary in the near future.

If you're early on in your career, and a high-flyer then you can assume your salary will increase quite substantially over the years.

If you're a couple with a baby on the way, then can you can be pretty sure that your income will likely go down.

ninky_2

i'd tend to go for the cheaper property. before committing yourself to debt payments for anything (indeed this works for any purchase not but more important for big ones) really have a long hard think about why you want it.

what is it about a big home that you want and are the sacrificies really worth it? is it for status / fantasy lifestyle (that you'll never have time to enjoy living anyway because you are working all hours to pay for it) / because that's what your parents or friends did or do / you don't really know but can't think of anything else to do with your life.

what are your hopes and dreams for yourself and your life? is this really going to help you achieve them?

possessions like houses come with responsibilities. think very seriously about them before committing yourself. if you're with a partner they need to think about it too and you need to be on the same page.