What should I buy? Small Flat or a Big House? Please share your experience.

Aze007

Hi,
I've moved to UK 3.5 year ago. Managed to save over £20k in this time.

Me and my partner have visited local independent mortgage adviser.
Been told that with our savings and income we can borrow up to £169.000. With our savings on top of that we can buy a house for up to £185.000.

We live in Midlands. I have been researching rightmove and zoopla.
Now I have 3 ideas.

Before I start. We are 25 and 24 yo. Not having kids and thinking(u never know ) not having any in 5 years.

For last 2.5 year we've been renting one bed flat (£525pcm)
It's been good enough for us. As we are mainly working, working and working. When we got some time off we spend it outside of the Flat.

There are ideas:

1) Buy 1Bed flat, cost £75.000 with £20.000 deposit, borrow actually £55.000. Pay it off in 6-10 years. Once its paid off. Go and sell it then buy a bigger family house.

+low overall cost of mortgage,
+save on APR%
+low bills,
+pay it off quick
+not chained to it for whole life
(I am foreign, everything can happen)

-leasehold
-ground rent etc
-will have to buy another house after few yeras


2) Buy 2Bed Freehold House cost £120.000-130.000 with (10% deposit) all what is left put towards refurbishing. Pay it off in 20-25 years. Hope that will be enough for family.

+big
+freehold
+buy cheaper and DIY most

-not actually using most of it
-not sure whether will be big enough
-long mortgage
-high mortgage cost
-not actually using second bedroom for least 5 or more years
-bills (got to heat it up, Council etc)

3) Go all in and buy 3Bed Freehold house, cost £140.000-150.000 with (10% deposit) Pay it off in 25 years or more.

+house that would be good enough for whole my life
+no more buying

-too big for least 10years
-big apr cost
-chained to one place, cant actually move


My dream is to buy Small 1Bed flat. Pay it off as quick as we can. Then after lets say 8 years put it towards big house purchase and to grow my family there.

I am looking for advice from people that have already been in same situation. What is your experience? How it was in your case?


Thank you!

AnotherJoe

Main thing to consider is that property prices tend to rise in percentages across all types.

So, say over say 3 years, the one bed two bed and three bed places all rise by 20% .
So in actual hard cash the bigger place gains you more in actual rise. eg rise on £50k house = £10k, on £150k house = £30k.
Buy a small place, and the next "size" up may rise faster than you can save.
As a practical example of that, my daughter sold a 2 bed and bought a 3 bed. Now, 18 months later, because the three beds have risen in actual real money more than the 2 beds, even though the same percentage, she probably couldn't afford the 3 bed now.

To use your numbers, say in 8 years prices have doubled. You make £50k on your flat sellinga 50k flat for 100k. But the three bed now costs an extra £150, eg £300k. What was a gap of £100k is now a gap of £200k. Can you save, even with reduced mortgage payments, £100k in 8 years?)

Or, and you seem very sure where you will be in 25 years time, but say you move after 5 years even if in three bed (change of circumstances, job move,whatever), the bigger house will hopefully have kept pace with bigger houses elsewhere, whereas your smaller place, most likely wont.

Finally you are young, your salaries will hopefully rise, so as long as you aren't over extending yourself, what seems tough to afford now, wont be so bad in a few years time.

So I'd say, buy either a 2 or 3 bed.

bengalknights

The other way to think about it is buy the flat then when your getting ready to move rent it out (release equity at same time) and you can then potentially have best of both worlds

AnotherJoe

IME being a landlord is never a best of any world. Especially with the new rules coming in.
The OP would also take an extra hit in additional stamp duty. And that wouldn't address the percentage rise problem.

chelseablue

If it was me I would by the biggest/best property I could afford.


Moving costs a lot of money, its best to do it as little as possible in my opinion

lexia

I'd go for the 2-br freehold house if I were you, and go for a good area with good schools. A 2-br house is enough for a family with very young kids (even if 2 of them, the first 5-6 years of their life they can share). Or, consider a 2-br long leasehold flat (over 100 years).

Definitely not the 1-br flat, if you plan to start a family. Things happen (people lose jobs, property prices go up - what you can afford to buy now, you might not be able to afford in 5 years from now).

Best of luck.

vacheron

I also had advice many years ago to buy the largest place you can and move as few times as possible, keeping buying, selling, moving, re-decorating etc to a minimum from a friend who had moved up slightly from a 1 bed flat to a 3 bed semi in 4 steps.

You will quickly expand your lifestyle to fit the space available, and it will happen far quicker than you think!

It certainly worked for me. Though I appreciate it may not suit everyone.