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How much mortgage should I get?

Hi

I am in the process of thinking about buying my first home and am having difficulty in deciding whether to go for a smaller house to begin with and plan to move after 5 years to a bigger one or whether I am better off going for a bigger house in the first place and avoiding the need to move later on.

I have worked out that if I were to buy a house for £125K and put down a 15% deposit that my mortgage payment will be around £560 per month and I would have (after all bills and other outgoings) just under £1000 per month left over so would be able to afford to save about £750 per month. If I go for a house at £150K and put down a 10% deposit my mortgage payment would be around £730 per month and I would have about £800 per month left over after all bills and other outgoings and would be able to afford to save about £550 per month but would not have the additional moving costs in 5 years time.

What do people think? Would I be better off in the long run to go for the bigger house in the first place? Is £550 per month a reasonable amount to be able to save? The other thing I have thought about is that if I go for the bigger house (3 bed instead of 2) I would always have the option of being able to rent a room out if I ever got into difficulties whereas with a smaller house I would not have this option.

Any thoughts would be helpful.

Comments

  • It would depend, for me, on both whether you think a lodger is a realistic proposition for you and what is likely to happen to your income

    When I brought my house in 2007 I was maxing out on what I could borrow on a 25,000 salary (120,000 loan) but needed as many letting rooms as possible. By getting 3 rooms rather than 2 I had a better income of course

    Fast forward 5 years to 2012 and I was on 50% more salary and had rented 3 rooms (I lived in dining room) for that time now mortgage is half what it was and most would say buying in 2007 was the worst timing possible

    So in a nutshell if u think your salary is likely to go up a lot and you want to rent rooms (subject to tax etc) then more rooms is a no brainer, it's very expensive to move after all
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Work out the cost of moving

    by going bigger/better you avoid that so the true extra cost is reduced.

    You also have to factor in the incidental benefit of a nicer place.

    As above if you stretch then consider mitigating the risk/cost with lodgers.
  • If your take home is only £1500 don't think you will get much more than £90,000 mortgage at best. Interest rates are very likely to go up so be careful. If you are confident your pay will rise rapidly you could push yourself otherwise be cautious it will be hard to make ends meet on that sort of income.
    :j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)
  • redcard
    redcard Posts: 1,563 Forumite
    Part of the Furniture Combo Breaker
    If I go for a house at £150K and put down a 10% deposit my mortgage payment would be around £730 per month and I would have about £800 per month left over after all bills and other outgoings and would be able to afford to save about £550 per month but would not have the additional moving costs in 5 years time.

    So you earn £1,500, mortgage of £730, leaves you £770. And you think £220ish is enough to cover your bills, food, repairs, travel?
    Hope over Fear. #VoteYes
  • beecher2
    beecher2 Posts: 3,677 Forumite
    Tenth Anniversary 1,000 Posts Combo Breaker
    OP's take home pay isn't £1500 - he/she has also factored in all other bills and outgoings.
  • beecher2 wrote: »
    OP's take home pay isn't £1500 - he/she has also factored in all other bills and outgoings.

    Ok ignore me then still sleepy.
    :j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)
  • Hi

    My take home pay is £2200 per month. I had factored in the following:

    MORTGAGE £730 HOME INSURANCE £25 PAYMENT PROTECTION £20 LIFE INSURANCE £10 MOBILE PHONE £32 CONTACT LENSES £15 GYM £33 TV LICENSE £15 INTERNET/PHONE £30 WATER £30 GAS & ELECTRIC £100 FOOD £200 COUNCIL TAX £100 PETROL £80
    TOTAL OUTGOINGS £1420
    Leaving me with £780 so intention would be to save about £550 per month and have the rest leftover for 'spending money'.

  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Have you made any pension provision?

    Car insurance car maintenance, buildings and contents insurance, property maintenance should be budgeted for.
  • ACG
    ACG Posts: 24,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    I could never live with a lodger, unless it was a good mate.

    But being able to save £500 a month even on the bigger property makes me think you can easily afford the bigger property without someone... if you cant afford it in the future:
    1) you would still have savings
    2) you could rent out a room if needed.

    Personally i would be leaning towards the bigger property all day long as there is no major affordability issue by the sounds of it.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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