Should we stretch ourselves now fo long term gain?

Crashy_Time

AlexMac wrote: »

My view is yes; go to your limit, as buying a house that you like to live in is not only great for quality of life, but an effective, tax free and "enforced" savings scheme. (Enforced because once you commit, you have to fnd the money to pay the mortgage etc, whereas conventional savings can go out of the window if other temptatio s arise!)

OK, you won't benefit from the silly, extreme levels of inflation of the latter part of the 20th Century and Noughties (ignoring the crashes and falls of 1987 and 2007/8 which mostly recovered in 3-5 years) but long term, you'll see great gains.

In our own experience, we see this by looking around our friends, none of whom were rich or very high earners, and most of whom started with similar modest first buys 40 or more years ago. We can see real differences; some now sitting on a million quid or more's worth of equity (We are in London and the SE), others on well less than half that depending on the choices they made. And the option to downsize if you really need cash.

Lots of variables; health, job security, the possibility of relationship breakdown or divorce... So the rule isn't a golden one... but i know what I'd do, again, if i was 50 years younger!

How do you know this?

Marvel1

In terms of insurance, look at the small print first of what they will pay etc (I don't have any myself).

I could have borrowed more and gone for a bigger one, but decided against it, living on my own, wanted to have something left to enjoy and not just bills and still do.

worried_jim wrote: »

overtime the property value will increase

Not always, mine has gone down.

DD265

I couldn't understand why we were being told to push ourselves to the limit so I asked; some of the answers might help you to decide!

https://forums.moneysavingexpert.com/discussion/5887127/stretch-yourself-why

We agreed on the maximum we'd be happy to repay each month, found out the mortgage that would give us, and found a great house which happens to be at the top of that budget. We've ended up £21 a month over our max repayment because the base rate went up in between our AIP and application but it's affordable even if interest rates go up a fair whack.

We've managed to 'skip' buying a flat/terrace which I would class as typical first buys in our area, and gone straight in at a lovely 3 bed detached, admittedly in a different area but closer to work. Like you, we wanted the 10-15 year house.

Crashy_Time

What long term gain is there now when rates are rising and the UK political class are hell bent on chaos? Maybe long term gain to be had after a proper price correction, but surely not now?

AlexMac

As regards

Crashy_Time wrote: »

How do you know this?

Puzzled by response to my opinionated post above

I know nothing. I merely live life

I buy house in 1975 for £10k. Leaky roof. No CH. Carp kitchen. Negligible bathroom. Rubbish area.

I work hard on improving it despite carp lack of skill

I sell on. Repeat every 8-10 years. Now have many skills

Also lovely house

Worth gazillions (which of course is lucky accident...as was not plan)

"How do I know what?"

I know nothing.. Just give opinion. Also Lucky

(But some say you make your own luck)

zagubov

It makes sense to get to your forever home in as few steps as possible.

TBH, In London, your four-bed house would be a forever home (it already is for us). If people can afford it, they buy a house one room bigger than they need and take in lodger/s.

Thrugelmir

Burchell27 wrote: »

My question is, is it more beneficial to stretch ourselves now and hopefully reap the long term rewards, or play it safer by taking a smaller mortgage and look at 3 beds instead?

There is a third option. Pay down your existing mortgage as fast as you are able.

When looking at the potential gain, factor in the amount of interest you'll pay over the term of the mortgage. Likewise the additional running costs (i.e. general rates etc) you'll be paying.

Crashy_Time

AlexMac wrote: »

As regards


Puzzled by response to my opinionated post above

I know nothing. I merely live life

I buy house in 1975 for £10k. Leaky roof. No CH. Carp kitchen. Negligible bathroom. Rubbish area.

I work hard on improving it despite carp lack of skill

I sell on. Repeat every 8-10 years. Now have many skills

Also lovely house

Worth gazillions (which of course is lucky accident...as was not plan)

"How do I know what?"

I know nothing.. Just give opinion. Also Lucky

(But some say you make your own luck)

You said - "But long term you will see great gains".


How is this knowable from any of your past experience?

Crashy_Time

Thrugelmir wrote: »

There is a third option. Pay down your existing mortgage as fast as you are able.

When looking at the potential gain, factor in the amount of interest you'll pay over the term of the mortgage. Likewise the additional running costs (i.e. general rates etc) you'll be paying.

The time to do that was over the last five to ten years, that was the window that the massive co-ordinated (failed) central bank bailout of the financial system bought you.

buggy_boy

Crashy_Time wrote: »

The time to do that was over the last five to ten years, that was the window that the massive co-ordinated (failed) central bank bailout of the financial system bought you.

You called that one perfectly didn't you... No wait you have been saying not to buy for donkeys of years. Now you are obsessed by transaction levels that you believe will lead to a crash, however what you don't know is people are still pilling money into property, they are just extending rather than moving... Try getting hold of any trades people right now.. I have done various renovations over the last 7yrs, this renovation I have had to do virtually everything as I can't get trades people for months, I even had to do all the electrics and then get the sparky to change the consumer unit and check everything I had done in an evening, only reason he did it was because I have sent work to him over the years otherwise I would have been at the back of the list and would have to wait for a few months he is that busy.