When best time to buy bigger?

garethD

To explain the question......

Myself and my GF currently live in a perfectly nice 3 bed house, which has about a 25-30% mortgage left to pay (which we could actually clear if we had to). The house however, is not the dream home (& it is perhaps a little to small for a family).

Question is, are we better simply carrying on driving down the mortgage and remaining where we are (as at this moment we dont need anymore space), or do we look to move and buy bigger now and start paying off a bigger mortgage?

The dream house is affordable, though pushes us towards the upper limit of what we are comfortable with (would be approx 50% mortgage but would wipe out all our savings and shares etc to keep it to that %), but if we do nothing then in a couple of years we will need consider moving anyway.

With house prices relatively stable i guess no real rush one way or another, but i'm interested in peoples thoughts and logic.

thanks
garethD

terrierlady

bigger now,prices low but, only what you feel is ok remember you only need 3 pay packets between keeping a house and losing it.Lots of people are not so lucky as you they dont have savings just live hand to mouth, so when disaster strikes lose all.

Bazshawkins

Prices lower now for a bigger place, but equally the amount you'll get for selling the current place will be lower than what you'd expect to get if/when the market picks up, so it is all relative.

[Deleted User]

Bazshawkins wrote: »

Prices lower now for a bigger place, but equally the amount you'll get for selling the current place will be lower than what you'd expect to get if/when the market picks up, so it is all relative.

But you can be that stamp duty won't be...

So, if you buy now, you may avoid paying more stamp duty in the future

princeofpounds

There are several conflicting issues here which will prevent anyone giving you a firm answer.

Let's assume that house prices are not going to grow above the rate of inflation long-term, given that they are at the high end of their valuation in terms of multiples of income. Of course we don't know what will happen here, but takes one complication out.

Let's also assume that debt is priced appropriately. i.e. that it covers the inflation rate at least over the long term. This is the other side of the coin in terms of financial speculation on property, which can distort the conclusion of the question you ask.

Now we have established that we won't be considering buying more property simply to speculate on house prices and/or interest rates, what else do we have to consider?

Your personal situation. Clearly this is no big driver at the present time.

The cost of debt. We have assumed debt has a real (i.e. inflation-adjusted) cost to it. So it is therefore something that, all else being equal, we should avoid to minimise our lifetime costs of housing. This would indicate that you should minimise your moves to reduce your debt burden over your life.

Stamp duty. A serious cost of moving (and this inhibition of mobility it one reason why I think it's a stupid tax). I don't know the price bracket you are looking at, but it may be relevant. This would also encourage you to minimise your moves.

Support and risk. Taking on a mortgage carries default risk. You only get government support for 200k. So from this point of view it is relatively rational to try to avoid having mortgages over this balance unless you have seriously good job security. And the bigger the mortgage, the harder it would be to service or clear if you couldn't work for any reason. However, depending on how much 200k buys you in your area, it might not be sensible to increase your purchases by this amount because of the stamp and other transactional costs involved.

So generally speaking, it is economically rational to delay your upsizing and to make each step up as large as possible unless it becomes an unacceptable risk. This makes sense when you think about it. Debt is the ability to bring forward consumption, for a price, from the future. Why overconsume now and pay that price, inhibitin your future consumption?

Having said all of that, the world is not an 'all else equal' kind of place. The two initial assumptions I made are big ones and whilst I think the risk of house prices running away is minimal, I do also think that interest rates are being artificially reduced and so it could conceivably be logical to load up on cheap fixed-rate debt whilst you can, even if it goes into an asset that doesn't appreciate much, simply because that financing may not be available 5 years down the road. But I need a crystal ball to tell you that.

Mobeer

I'd stay and save.

Smaller house = no stamp duty owing right now, lower council tax, lower heating cost(?).

Pay off as much debt as you can, save and keep flexible for the future, so that if something unexpected happens (e.g. lose job, or want to move elsewhere in the country, or have baby) you are relatively safe.

sunshinetours

Can you extend and create your dream property?

Moving costs are always "dead money" and go a decent way to providing an extension

Just another alternative - personally in your current strong position I would sit this out for a while to further improve your strong position

Also do you have a good current mortgage deal, and what would deal be if you moved?

nomoneytoday

The price of both doesn't matter IMHO. The cost to change is important, and when you feel you can afford that difference every month

allybee101

Bigger house = bigger bills for gas, electric etc (more space to heat), higher council tax, insurance, maintenance?
You might need to consider other costs as well as the mortgage. Invariably more than just an increased mortgage.

KatieJayne

We're selling our immaculate 2 bed to buy the 'family house' now, before kids come along and we have no money for moving costs. Being the main earner and the one that's going to be taking the cut in pay when kids come along, I feel like I need to do this now, and get settled into paying a higher mortgage before life steps come along and I can't pay for us to move. That's our logic anyway!

garethD

Thank you all for you responses, food for thought for sure.

To answer some of the questions/points raised:

We don't want to move to an intermediate property and want the next move to be the last (barring lottery wins or other big changes to our lifestyle of course).

The 'dream' houses we are looking at would have scope for extension and improvement, and moving into to begin works, before we start a family, is appealing. However we are both quite risk averse and do like the comfort of being in the fortunate position of being able to be mortgage free if we had to be.

Current mortgage is a 10yr fixed, so no scope for change without charges (possibly not our finest decision).

Properties would be in the upper part 3% of the stamp duty band, so if and when prices start to rise then we might be in danger of crossing into the next band.

Thank you again.

garethD