buying tiny place with small mortgage

paddy's_mum

Why not try renting a typical seaside holiday town mobile home for a month, preferably in a wet autumn or early winter slot and actually experience living in a small, cramped space with no possibility of enlarging the space (garden shed or similar) before you decide which is actually a realistic line of thought.

Red-Squirrel_2

korvin wrote: »

Hi people!
I can see a lot of people trying to pay off their mortgage. My husband and I are thinking in a different direction, maybe completely crazy.
We have £40 thousand saved for the deposit, but we were thinking about buying just a 1-bed apartment for £80-100k so that we can repay it as soon as possible.
We have a pre-school son, and we are aware it will be a challenge to live in such a small space, but wouldn't it be worth it? Achieving freedom early on? and not buying something that we actually can't afford? I never understood why people in the UK buy 3-bed houses when they have no kids or one kid. Is there really so much need for space? I guess people in other countries live in much smaller places.

Is this just a way to avoid having any more children? Because you can just say no you know...

datlex

korvin wrote: »

Hi people!
I can see a lot of people trying to pay off their mortgage. My husband and I are thinking in a different direction, maybe completely crazy.
We have £40 thousand saved for the deposit, but we were thinking about buying just a 1-bed apartment for £80-100k so that we can repay it as soon as possible.
We have a pre-school son, and we are aware it will be a challenge to live in such a small space, but wouldn't it be worth it? Achieving freedom early on? and not buying something that we actually can't afford? I never understood why people in the UK buy 3-bed houses when they have no kids or one kid. Is there really so much need for space? I guess people in other countries live in much smaller places.

Personally I would look at a 2 bed place in your circumstances. Where are you living currently? How long did it take to save up the £40000? Repaying as soon as possible is a vague phrase- do you mean 10 years, 15 years? That should be a factor- mortgages companies will have minimum terms they will offer a mortgage for.

Thrugelmir

Silvertabby wrote: »

Exactly. We (also just the two of us) originally thought we wanted a 3 bed, but only the 4 bed option gave us the must-have of a separate utility room. No regrets - master suite, guest bedroom, study and hobby room - plus extra space downstairs. We're certainly not 'rattling around' in a too-big house!

After many years in a large house (when there just 2 of us). I now wonder why we didn't buy something smaller. As really didn't utilise all the space fully. As opposed to just filling it!

Crashy_Time

lisyloo wrote: »

Well I have a 5-bed so perhaps I'm well qualifed to contribute an answer :-)
We didn't particularly want 5 bedrooms but we did want a large kitchen with space to cook and entertain.


Is there a need? no
Is it nice to have space for all your stuff, guests and have a big kitchen to cook in (or whatever you like) yes it's nice.


We consider residential property as a good home for some of our money (as PART of a balanced and diversified potfolio) because

a) It's CGT free
b) whilst you have a mortgage it's geared - by that I mean you'd get the gain on your £80K-£100K house rather than putting only £40K in stocks and shares and yours is very modest amount of equity, in many cases it's a much larger amount that's gaining (over the long term).
c) you can enjoy a spare room, conservatory etc. more than a share certificate
d) it's diversification from equities and cash as PART of a balanced and diversified portfolio.


Some smaller but some larger.


But if small suits you then go for it. You don't need to compare yourself with anyone else if it suits you.

The only thing I would say is do compare with the alternatives i.e. where else your money will go.


Do bear in mind that with apartments there are ground rent, service charges and issues that you don't get with your own property (like for example a massive bill for new cladding as a topical example).


I don't understand why people need to spend a lot on a new car (well I do).

Mine is 20 years old and cost me £200 but it's all down to personal choice and perceived value.
I think most people woul dunderstand enjoying living space with their family more than a share certificate !!

"Gearing" works great as the property bubble inflates, there is even "Double Gearing" for the seriously bubble minded investor, but as interest rates rise and property prices drop it will become increasingly difficult to release any money from a house (without sizeable price drops) no matter what you want to believe it is worth on paper. Pop your savings into an illiquid depreciating asset like property now and it is gone forever maybe? The advantage of a share certificate or bank account is that you can get the money out quickly. Best to rent cheaply, save more, and start viewing decent sized property when value starts to return to the market IMO.


https://www.mlc.com.au/understandingseries/understanding_gearing.pdf

Crashy_Time

PasturesNew wrote: »

It's a bit misleading if you think it through.

The fisherman has a boat - that boat is the "wealth of choice". He can choose whether to fish, or not - and how long for. He could also sell the boat and move/do something else if he chose to.

Roll it back one more layer, if the millionaire had sat beside a poor fisherman without a boat, who just caught 2 fish per day, then the route the businessman presented would be more appealing as it'd give the fisherman more choice.... to get to the stage the fisherman with the boat is already at.

wealth = choice.

You need to be at a reasonable starting point, to be able to enjoy and benefit from things.

A little 1-bed place, for young people with options and a child, is not going to give them the wealth of true choice 10-20 years into the future.

The fisherman with the boat ( = 3 bed house) can downsize to a rowing boat ( = 2 bed house) or to sit on the riverbank with no boat ( = 1 bed house)

A fisherman sitting on the bank of the river without a boat ... is stuffed if he needs/wishes to make choices.

There's no downsizing from the bottom of the market.

Mortgage debt doesn`t equal "wealth" though, especially if you "invested" in a London 600k shoebox :rotfl:

kingfisherblue

I can't imagine being in a home where you don't have a separate bedroom from your child. One bedroom for a couple nad a child is definitely a no-no for me because children have a habit of growing. They want their own space, and you need some space for their toys, books, clothes, etc. Presumably the lounge will have to double as a bedroom - what a nightmare! The lack of privacy, the lack of space, and nowhere to just go and recharge your batteries alone. Nope, definitely not for me!

We were in a two bedroom terrace, which was lovely. We moved for two reasons - one, to expand our family, and two, to be closer to my parents. It wasn't that much more considering we now live in a better area, with more space, a garage and gardens front and back. My mortgage will be paid up next year - I'm 50.

My daughter and her partner were able to put down a larger deposit than my ex and I had been able to. They have started in a three bedroom semi, a little smaller than my house, but still in a decent area. They were fortunate to get it for a good price. They have one child, with another on the way. Both work (around £30k a year between them), my daughter part time since the birth of their first child. They overpay their mortgage, and assuming they don't move and continue the over payements at their current rate, they will have paid it off just twelve years after taking out their original mortgage.

Obviously it depends on what part of the country you are in, but with £40k deposit, I would be looking at a two bedroom house as a minimum. I wouldn't want a one bedroom place at all, especially with a child. And regarding a mortgage, you really don't miss the money. It's something that is paid out every month, so you just don't miss it.

Teamocil

You realise your child is an actual human who might want some privacy? It's up to you if you want to live in a chicken coop but it's a ridiculous decision to make for someone else.

boliston

Teamocil wrote: »

You realise your child is an actual human who might want some privacy? It's up to you if you want to live in a chicken coop but it's a ridiculous decision to make for someone else.

unfortunately with property price rises continuing to outstrip wages i think this situation will happen more and more as people simply cannot afford property large enough for their needs - the block i live in is almost all 2 bed flats but there are a large number of families, many with 2 or 3 kids in tow

skint_chick

Could you not just buy a 2 bedroom house so you have a bedroom for your child and some family space as well as your bedroom, then just take the mortgage over less than 25years if you can afford to? There's no law that says you have to borrow over 25years, it's just traditionally been the most common mortgage term - although these days people borrow for up to 40 years depending on their age and affordability. You can also get mortgages with flexibility to pay extra without penalty so even if you do borrow for 25years initially you can pay extra every month/whenever you have it.

I'm not sure I would want to live in a 1 bedroom space with a child as they grow up, and moving again has costs in terms of solicitors and estate agents fees so if it was me I would buy a slightly larger house now to avoid moving again and potentially wiping out any mortgage cost savings with fees. You could always buy a 2 bed with a larger 2nd bedroom that could be divided into a 3rd bedroom or shared with another child if you plan to have more kids. Ultimately it's your decision but make sure you're thinking long term rather than just the next 5 years because then you can start your mortgage free dream sooner.