Play it safe or Go for broke??

RoxieW

finding somewhere to extend would be ideal as hubby is an architect. the dream was to build our own but with land prices what they are its highly unlikely at minute. extending would be a good compromise - its just finding somewhere that has the potential.

RoxieW

PS what would you offer on a 200,000 house. I read somewhere to make an offer of 15% lower than asking. Does this apply to brand new build houses -or are their prices more 'fixed'.
thanks

do_it_today!

Hi RoxieW :hello:
You could offer 15% lower then asking but that would probably be a starting point if you can find an affordable fixed rate for 5-10 years I think you could go for it! you are young, have energy and career prospects and have proved you could earn more already - personally if I had focused on my mortgage costs rising to 12% when I first bought I would still be in a council flat - instead I got a capped rate so I knew where I stood (to be fair this was in 1997 and I appreciate I only needed 4k deposit then not the 16k I would need now for the same flat! and rates were higher) My point is I did freak out - and worried I wouldnt be able to cope but looking back 10 years on... 40k is NOTHING now (where I live) also in that time my income has doubled

- I still think you would have to be like 96% sure it was your forever house! also keep looking around you may find a comparable for for 20k less - what is it about THIS particular house that makes it a forever house and could you find it for less?
Also are you 120% sure you want to go back to working fulltime? if you are only really motivated to do it because of the house you may not be happy - as things are now your lower outgoings do give you options because of the extra money you have available and a plump cushion if things were to go wrong? back then my contingency was I would go home to parents if things went tits up your situation is a bit different as you are a family- I guess think about what worst things that could happen and if they did how you would deal with them. I know how you feel about really wanting to move to somewhere else and its really important to balance what the reality of it could really mean for better or worse.

and remember houses are like buses!

RoxieW

thanks doittoday - i agree, i dont actually know anyone who could afford their mortgage nowadays if interest rates went to 12%! thank you for the helpful advice - i am motivated by the house to go back to work full time (ish) but also my youngest will be starting school in a year so it was always the plan that I'd hop back on the career ladder then. i would much prefer to move into a house we will stay in rather then a stop gap house. for our money we can just about get what we want (4 bedrooms, garden) but only just so that makes me panic abit and want to grab with both hands asap. you are right thou - houses are like buses. i need to realise that i think.
I hope it will be ok if we go for it - I see it as a calculated risk - things could go horribly wrong if say there was a high hike in rates or one of us lost a job but that risks always there I guess. Worst case we'd drop off the ladder and rent. Things will be a bit tight for a couple of years while we work up career wise but i think we should ride that out. Hubby thou likes to play safe.

izzybusy23

How would you feel if in 12 months time your dream home had £50k wiped off the value of it, but you still had to go to work because you had taken on a bigger mortgage , overstretch yourselves and worst of all found yourselves in £30k equity? That dream house would suddenly become a very big millstone around your neck.

Seriously.. right now is the WRONG time to be looking to take on a bigger mortgage and overstretch yourself. So many things are pointing to a big downward spiral and you must be blind if you don't see things on the news in the papers etc. All the signs are there.

Good luck whatever you choose.

Lomion

izzybusy wrote:

How would you feel if in 12 months time your dream home had £50k wiped off the value of

Value only counts if you are selling the house. OP has said they are not planning on moving again after this, so any changes to the house value are totally immaterial. It doesn't matter what the housing market does

All you have to worry about are making the mortgage payments every month for the next 25 years

Jonbvn

Lomion wrote: »

Value only counts if you are selling the house. OP has said they are not planning on moving again after this, so any changes to the house value are totally immaterial. It doesn't matter what the housing market does

All you have to worry about are making the mortgage payments every month for the next 25 years

I think you have missed the point. Changes in the price of the house are only immaterial once they have bought it. The point is if they wait a year, then there are several indications that their dream house (or one similar) is likely to cost less money.

Lomion

Jonbvn wrote:

I think you have missed the point. Changes in the price of the house are only immaterial once they have bought it. The point is if they wait a year, then there are several indications that their dream house (or one similar) is likely to cost less money.

err...after they bought it was my point

Getting on to your point, there are also several indicators that suggest the price of houses will flatten over the next few years. Some people even think they might go up slightly :eek: I don't honestly think anyone knows what's going to happen.

Up or down Roxie, the only questions you really need to ask yourself (and be absolutely sure you are happy with the answers)........Is the house worth this much to me right now and can I afford the mortgage payments for the next 25 years based on this amount no matter what happens.

carolt

If you've got kids at school/starting school I'd put their needs first and look at how your oldest would feel being moved to new area/school - possibly more than once - but also if you don't move now, putting your younger child through it too - it is disruptive to them.

That said, even if you plan to sell and move in time to avoid this - and you'll have to move soon if youngest is going to be in situ to apply for nursery/reception before end of deadlines - you can't guarantee it will happen, as in the current slowing market you might find selling your current place takes longer than expected.

We were in a similarish position to you earlier this year - though not selling anywhere and not looking to move to a new area - and looking at similar income multiples. Like you, I'm largely a SAHM at the moment, and so multiple would have been based purely on OH's salary, although I could have gone back to work if necessary. But we decided it was too risky and prices were going to fall.

However, the differences in our situation - we had no equity to lose so would only be gainers by a house price crash/correction, and we were not looking at our dream home but merely somewhere that would do, in the short/medium term - are quite significant. If I could get a lovely 4 bed, and was sure my earnings were going to rise, I'd be more inclined to take the risk, to give my family stability. As others have said, it doesn't matter if prices fall unless you were planning to sell, which you wouldn't be.

Two more points - firstly, I'm assuming you know the area you're moving to well, otherwise i'd certainly advise renting first to get a better idea of where you want to live. I, along with all major commentators at the moment, think house prices will fall or at best stay level at the moment. So i wouldn't worry about being prices out of the market.

Secondly, rather more significantly, I'm not at all sure you'd find any (non-subprime) mortgages that would offer you that amount anyway, at the moment. When we had our mortgage agreed in principle near the beginning of the year, Northern Rock was the only high street bank that would offer us 5 or more times salary - and we had a 15% deposit, not 5%- I don't think they would have lent that to us then without it, and UI'm sure they wouldn't now.

So this discussion may be a bit academic - your dream home, like it or not, may well be out of reach till prices fall further....

Jonbvn

Lomion wrote: »

Getting on to your point, there are also several indicators that suggest the price of houses will flatten over the next few years. Some people even think they might go up slightly :eek: I don't honestly think anyone knows what's going to happen.

Just because house prices have fallen in USA, Ireland, Spain. France........
There is of course nothing to suggest that house prices in the UK will not buck the trend and continue onwards and upwards forever:eek:

I'll have a pint of what you're drinking;)