FTB Dilemma

Jwooly

Hi all,

We're FTB, both earn about £23k a year, and have 15% deposit.
Here's our dilemma...

We could buy a 3 bed house we like, it's nice but small and we'd have to move out in 5-10 years as we outgrow it, cost about £155k so looking at £750 a month on a 25 year mortgage which would be easily affordable, and if one of us lost our jobs we could still afford the repayments.

Other option is to buy a bigger 3 bed house which we would never be in the position of "having" to move out of....but priced at £185k, but could hopefully get for less.

We could afford the mortgage repayments now, but if one of us lost our jobs or gave up work we'd struggle.

Do you think it would be a good idea to take out a 30 year mortgage on this house, but repay at a 25 year rate while we could, and thus have the flexibility of lower payments if need be and not have to move?

I welcome your thoughts

Thrugelmir

Buy the smaller property and overpay the mortgage while you have the money.

You'll pay less interest and build more equity far quicker.

In the future you can then reconsider your options.

The_J

Buy the bigger property and avoid paying two lots of stamp duty, solicitors fees, moving costs and the like.

Take out MPPI to protect yourself against losing your job.

Sit back and enjoy your new house without having negative equity ruin your plans in the future if house prices drop.

harvey115

I would also go with 'The J''s suggestion.

In fact I am almost doing the same thing. The cost of moving is very high indeed...

Dave_Ham

Add to the J master plan, assuming and I think you are young; extend term to 35 or 40 years and overpay whilst it is affordable and if not revert to actual repayment.

Be mindful if you can hold off the rates get a lot more appealing with a 20% deposit...

All the best...

lowlitmemory

I would buy the bigger place. It's essentially what we've done, buying a 3-bed split-level rather than a 2-bed place which we would need/strongly want to move out of within 5 years. I'll assume you're young... our bank said they'd do a 35-year mortgage for us as long as it ended before we are 60, so essentially we had to be under 25, but they may have different rules in different places/for different people etc.

Good luck!

savageHK

We've just bought a house we'll hopefully never need/want to move out of, and yes it was pricey. We've gone for a 40 year term with full intention to have it paid off way before then but as you've said you have the flexibility to reduce payments down to their original level (if not lower) if you are temporarily unable to keep overpaying. We're both 30 and bank had no issues providing us with 40 year term provided we have a pension to pay it back over. As state pension age for us will be 68 (or more!) we're not too far into 'retirement' at 40 year term.

We went with Nationwide's Flexclusive offer which allows overpayment and no ERCs; rate only starts at 15% deposit, do you have the 15% for both houses or only the cheaper one?

Another thing to watch out for are all the other moving costs - solicitors, moving itself, stamp duty... not cheap to move and not easy either, would not want to do it again any time soon!!

DannyboyMidlands

I'd buy the smaller one for as little as possible on the cheapest base rate tracker I could find. Then save like a b&stard for the next 5 - 10 years.

At that point I could sell and buy a nicer 4 bed place for cash. Or, if I could be bothered, rent the first place out. Or, considering that I like it, stay put and sit on a large pile of cash.

Jwooly

We're only 23 so plenty of working years left ahead of us! Don't have 15% deposit for a big house at the moment but will only take an extra couple of months to save the difference as living at my girlfriends parents house for now!

Question is of course will I actually end up overpaying at all or will it end up going on holidays, cars and clothes? But I guess if I will eventually have to move then it's worth buying a bigger house, as the money will have to be paid anyway!

savageHK

Jwooly wrote: »

Question is of course will I actually end up overpaying at all or will it end up going on holidays, cars and clothes?

Set up a standing order to go out your account before you even 'see' the money on payday. Check with the mortgage fineprint though on how they treat overpayments and how much you are allowed to overpay to avoid triggering charges.