Buy the most you can afford?

Greyhorse

Is this outdated advice that grandparents give or is it something I should be seriously considering?

We are currently house shopping. Can't find anything that ticks all the boxes in budget. We have seen a house that would suit everything we want however it is 30k over our sensible budget with no room for negotiation. We budgeted an amount that would leave us a reasonable amount left over after bills so we would be comfortable.

Houses in budget are a 3 bed semi type, expensive house is a 4 bed detached with much more space and potential to add value.

We could afford it but it would leave us being able to pay the essentials but no real luxuries- i.e no holidays or days out for a while!

Some advice we have been given is to go for the more expensive house however it's making me nervous to think things would be so tight especially if interest rates rise.
However if we buy the 3 bed there's a chance we would want to move in 5 years time.

Has it worked out for anyone or is it always a bad idea?
I am aware markets could crash etc but we can't stay here forever just incase...

lee111s

Buying to move in 5 years time when you can afford to buy bigger now is a false economy.

Solicitor fees, stamp duty, ea fee's, decorating/diy/furnishings etc will all be duplicated.

If you can afford it, and it's somewhere you're likely to stay for a lot longer, go for the bigger one.

AndyBSG

I really wouldn't buy at the limit of my abilities in the current market.

Interest rates at the moment are so low that it is unsustainable and the will go up.

If you're at your limit then when your fixed term mortgage rate ends you'll find your monthly repayments go through the roof.

ThePants999

Yup. "Buy the most you can afford" is very sensible, as long as you're realistic about the "you can afford" bit. It doesn't mean "use up your contingency funds" and it doesn't mean "rely on low interest rates".

neilio

Go for the more expensive house and make it your forever home. Yes, you'll need to make sacrifices for a year or two, but so what? The luxury holiday destination will still be there next year or the year after.

While you're at it, try and find a decent mortgage broker, get a good relationship with them. They'll have access to the best rates and deals, and then you can go back to them when it's time to remortgage to weather any potential changes in interest rates.

TBagpuss

I think it depends on how tight things will be if you buy it. Obviously no-one can predict evey possible eventuality but it is sensible to have a little bit of breathing space.

for instance, you can get a fixed rate mortgage so you can protect against interest rises in the short term, and look at income protection insurance in case of illness or redundancy a year down the line, but you ned to budget for things such as maintenace and repairs (to the house, and also to things such as cars!) amd you also need to plan for future riss in interest rates so unless you are a t a pointin your careers where you can expect your income to rise faster than cost of living, you would need to plan for those future rises in outgoings.

if it is a case of holidaying at home for the next year or two then do it. If it is a case of putting yourself in a position where an emergency like the car or boiler dying would push you into debt then I'd kep looking.

Is there any wriggle room - for instnace, a 4 bed in a different area or with a smaller garden?

It' s also a matter of personal choice - how important is it to you to be able to have the holidays and days out? How long will you have to tighten your belts for and how do you both feel about that? Do you have, or will you be able to afford some savings for emergencies once you have moved in?

For instnance, I've not had a holiday for 2 years because I chose to pay for some fairly expensive improvements to my home. I spend a lot more time there than I do on holiday, and so it was worth it to me to spend the money in that way (and while I have no intention of moving in the foreseeable future, the things I have done will have added some value to my house, although not as much as I spent on them)

comeandgo

I would say buy your forever home now. We did this eleven years ago and it still gives me a thrill to have this house. I love it and would go without holidays for a few years if i had to.

martinsurrey

AndyBSG wrote: »

I really wouldn't buy at the limit of my abilities in the current market.

Interest rates at the moment are so low that it is unsustainable and the will go up.

If you're at your limit then when your fixed term mortgage rate ends you'll find your monthly repayments go through the roof.

I bet they said that in Japan in 1995 as well, 22 years of super low rates later...

While I agree to an extent, without knowing a lot about the OP we cant be sure.

On a 5 year fix (25 year term) and 3% pay rises per year (so just above average, no promotions).

By the time the fix ends, the mortgage will be 10% lower and the OP earning about 16% more.

Add in the OP is more likely to be younger, so more potential for promotions and stretching now might not be a bad idea.

As I said though, you would need the full picture to have a good stab at it.

Niv

So many factors to take into account.


In hindsight I should not have bought my first house and should have gone straight to what turned out to be my second house. It would have worked out ok, but at the time I was not willing to make that stretch.


The difference on monthly repayments on a £250k mortgage compared to a £300k mortgage over 35years is ~ £200 a month. If that is comfortable (and you can get it) then it is probably worth it in the long term as you would save on moving costs and reduce stress on moving etc.

Out,_Vile_Jelly

If you're not likely to move for a long time, then a detached spacious 4 bed sounds great- providing you really can afford it (ie contingency plan for interest rate rises, maternity leave, illness, boiler breakdown etc).

People in this country used to make do with a week's camping each year; not sure when expensive holidays became classed as necessary. There are plenty of days out doing free stuff if you do some research.

martinsurrey

Out,_Vile_Jelly wrote: »

People in this country used to make do with a week's camping each year; not sure when expensive holidays became classed as necessary. There are plenty of days out doing free stuff if you do some research.

and the parents of the people who "made do with one weeks camping" said

"we used to make do with a day trip to the beach and an outside toilet, not sure when a weeks camping and internal plumbing became necessary!"