Do you push yourself on your house?

[Deleted User]

How much do you push yourself when it comes to buying a house, myself and my wife have very good paying jobs and on our mortgage application it came back with a figure of what they were prepared to lend us. We have actually offered on something which is 300,000K less than what the mortgage company are prepared to lend us. We have a good amount of savings in the bank in case anything happens to eithers job where it would tide us over for at least 1 year. Would you look at other houses for maybe more??

princeofpounds

Depends if I needed the space and if I was bullish on house prices or not.

If you have no strong opinion on house prices and have no need for the surplus space then I would not stretch. By having a lower LTV you will get a cheaper mortgage which saves you a lot of money in interest. This is a certain saving.

Bella73

We borrowed less than we "could" have, to be honest if we had taken what we were offered I think things would be rather tight, but we planned it so we can live a little as well, however, we bought a home not an investment, so it really is just somewhere for us to live rather than worrying about making a profit as some people do.

lincroft1710

I'd love to be in a position where a lender would offer me £300K, never mind £300K more than I actually need.

pinkteapot

Hard to advise without more detail of your finances, but we bought conservatively a few years ago and have just changed our minds and bought bigger. Our thought processes below, in case any of it is relevant to your situation.

We bought in 2010 for significantly less than we could have borrowed. We got a mortgage for £100k when our combined income was around £120k per year (it's now less than that as I quit my evil banker city job!). We overpaid the mortgage by >£60k in three years and were looking at being mortgage-free by about 2015 (in our mid thirties).

We've just sold that house and moved to one costing almost twice as much. Much nicer house in a much nicer area. I now regret buying so conservatively in 2010, as we could have jumped straight to something better, although we couldn't quite have stretched to our new house back then.

Despite increasing our mortgage from £35k to £245k, which still sounds like a scary amount to me, I have to keep reminding myself that what we've done is relatively low risk:

1. We've bought in a hugely popular area. Only three houses came up for sale last year and all sold within days. If we had to sell up again, we could.

2. We've got almost 50% equity in the house, so there's next to no risk of getting into negative equity (or, if we're in negative equity, it's likely that the whole economy is royally screwed and the house price will be the least of our problems!).

3. We're still able to overpay by a significant amount (aiming to halve the 28 year mortgage term that we took out).

4. If we both lost our jobs tomorrow, we've got enough in cash savings in the bank to pay the mortgage and bills for around 18 months - more than enough time to sell the house.

5. We can afford our mortgage if the Bank of England base rate increases to 7.5% with no cutbacks in our monthly spending. We can afford it up to probably 9% with cutbacks. By the time the base rate gets this high (if it does), we should be earning more anyway.

We wanted to go ahead with buying bigger for several reasons.

Firstly, if we hadn't, after paying off the mortgage we'd have had to come up with a good investment portfolio for our spare cash that had been going on overpayments. Frankly, we're a bit lazy for that!

Secondly, ploughing the money into property seems to make sense long-term. Even if property prices change, our new house is worth about twice as much as a nice retirement bungalow. That relative price difference should still roughly hold in 30 years, enabling us to downsize and free up funds. Equally we could have achieved the same by staying put and saving/investing, but this way we get to live in an amazing house in the meantime!

Thirdly, for the reasons above it was a relatively low-risk move, even though the size of the mortgage seemed terrifying! And from it we've got an absolutely wonderful house that I'm excited to go home to at night. Only been in a month but I'm already convinced it was worth it.

Mortgages get easier with time because of wage inflation. You take your mortgage out and it doesn't increase with inflation over those 20-30 years, while your income should.

One key consideration is kids if you don't have them yet. If they're in the plan and relatively soon, look at what the monthly budget looks like accounting for one income or childcare costs. Make a plan for getting through that hard phase when the kids are young, before wage inflation has kicked in significantly.

[Deleted User]

Already have 1 girl not planning on more tbh, I was the one saying to my wife I wanted a nice house in nice area which will suit us for the next 15 years which we have got now and finally I suppose its nice to be in a position where we can live better than worrying about the mortgage costs...

Mrs_Z

Buy the property you like the best - not necessarily as expensive as you can afford. We have always bought less expensive the we could have afforded to. This has served us very well, but looking back we would be sitting on an absolute mint had we borrowed the max we could have 18 years ago and bought with that. We only took about 50% mortgage what the bank would have lent us. However, we have been very happy in our house and are only looking to move now.

Realopinion

If you do stretch yourself, you might be able to get a decent mortgage interest rate.

My wife and I got a 5 year fixed mortgage on a property we are buying - we looked at shorter terms but base rate is bound to go up next year and that'll push up mortgage interest rates.

With that said, having a larger deposit means you can tap into the much better interest rates and still buy the cheaper house. It means you'll be paying less in interest over the term and be able to add to your savings.

Right now, I'd not stretch yourself. You could end up buying a property at the top rung and then be stuck because your loan to value was high because you stretched yourself; meaning you pay a higher interest band. Then in a few years time when you come to remortgage, the property value has dropped and you may be in a pickle paying off your mortgage on a variable interest rate trying to get the equity back.

It is a tough decision, but I don't think now is a good time to stretch yourself. Perhaps buy cheaper and buy a bigger property in 2 or 3 years time after the inevitable crash hits the property market and you can get more house for your buck!

Prothet_of_Doom

The more you borrow, the more risk you take. The more risk you take, the more you have to gain, and the more you have to lose.

AdrianC

Do you want/need a £300k "better" house? Don't forget that over the life of the mortgage, you'll be paying back a LOT more than £300k for that difference. What if/when interest rates rise?

katejo

Deleted_User wrote: »

How much do you push yourself when it comes to buying a house, myself and my wife have very good paying jobs and on our mortgage application it came back with a figure of what they were prepared to lend us. We have actually offered on something which is 300,000K less than what the mortgage company are prepared to lend us. We have a good amount of savings in the bank in case anything happens to eithers job where it would tide us over for at least 1 year. Would you look at other houses for maybe more??

I bought my current house before the recent recession and had a good sized deposit from the sale of my flat. The lender was happy to loan 5 times my income but I knew I could not afford the repayments as the interest rate was then 6%. I only borrowed 3 times and that was right at the time.