Buy the most you can afford?

Crashy_Time

http://www.reuters.com/article/us-usa-fed-yellen-idUSKBN16A26C

Crashy_Time

AFF8879 wrote: »

Given how tight mortgage affordability criteria are (and they are VERY tight), then theoretically you should be declined a mortgage for anything that is even slightly considered as "stretching it". I have £2,500 a month left after mortgage payments (I bought last year) , no other debt/commitments/dependents, and was still turned down on affordability grounds by 1 lender. Though my broker did say he think they made a mistake! But I know quite a few people who had mortgages declined when it all the website calculators said they were a sure thing.

Just means prices will need to come down, and that is a good thing.

Greyhorse

Thank you to you all.

We had a DIP with nationwide and also a mortgage promise from Halifax- one for 300k and one £250k.

It's scary that we could be declined though.

I think bigger home is out, just hope we can find somewhere cheaper that we love as much.

Sausage11

martinsurrey wrote: »

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

Sorry martinsurrey, I couldn't resist picking up on this.

They may have had 22 years of low interest rates, but they've also had possibly the biggest property crash in history with prices falling pretty continually since 1997, coupled with a deflationary environment which means that debt is increasing in real terms. Oh, plus the increasing pressures on the Japanese salaryman where, as in so many places, a career for life is increasingly rare.

But apart from these minor issues anyone that maxed out their purchase in 1995 likely timed it very nicely!

On a more serious note, I agree with your comments that a fixed mortgage is a sensible way to go in terms of controlling risk for some time.

juniordoc

There's a chance that house prices will stagnate with brexit and that next year interest rates will be on the up.
You risk negative equity by stretching yourself for a mortgage. If you can't afford a house without borrowing from family as well as the bank, then you can't afford the bigger house. Put this option out of your mind and stop torturing yourself!

Greyhorse

It's gone Junior, I'm glad for the reality check!

I wish the EA had never shown us it!

getmore4less

The key with the buy the best is to reduce the number of moves unless you are property speculating then you buy the one you can make most money on.

The costs of moving can say goodbye to fare few holidays worth of cash.

If you can get into the this will do us family home in 2 moves rather than 3 or 4 could save loads even if you are stretched a bit.

If the career is on the up that first stretch will probably only be a couple of years anyway before the income catches up.

dirty_magic

OP I wouldn't even consider a mortgage of 1k per month on your salary. It really is pushing it, especially if you have debts and cars to pay for. It's no fun never being able to go out or go on holidays, having to think about every penny you spend. It's easy to think you'll be ok with it but life gets you down when you have to live like that.

What happens if your boiler breaks?How will you save for the modernisation? What if your car needs repairs? There are always problems that pop up and even the simplest of problems can end up costing money to fix.

I think mortgage companies are irresponsible. They're supposed to make sure you can afford the house you buy, but the max amount they said we could borrow when we bought ours was ridiculous.

JP1978

If you have to cut back on all luxuries now to buy the bigger house - what happens if the rates rise?

If, however, you are just cutting back on some with more wiggle room, then yes, I would go for it.

We have done the later just recently, things are tight on the finance front BUT we do have a lot of luxuries that could go if needed - Good sky package, take outs, eating out, Netflix, Amazon Prime, Car Warranty, extras added onto car & home insurance, sell one of the cars (is HP free), other car's HP ends in August which will free up another £300/month....

In your grandparents day it was the thing to be thrifty but our generation its generally opposite. The question is, how easy would you be able to give up the luxuries for a bigger house if you needed to?

[Deleted User]

There is another option to consider. Buy a house you are happy that you can afford now (even if interest rates rise), but one that can be easily extended at a later date when your finances improve (so make it a house you'll be happy to stay in for a very long time). Friends of our did this and they've been there for 18 years! Worked well for them.