First time buyer

patch9495

Hi Guys

We are looking at buying within the next year, and was after advice regarding first time buyers

We are in a position to put down a decent deposit and still be able to afford to overpay the mortgage on our monthly salaries

Would it be wise to stretch ourselves to the highest value property the bank will lend us (whilst still being able to overpay a decent amount per month, and maintain our current standard of living), or buy a cheaper property and overpay more than we would on the higher value

My thinking behind this is if we can get a higher value property this will allow us to benefit on a greater scale if any capital gains occur

Thanks in advance

patch9495

I forgot to add that our plan with this isn’t a long term family home. It’s a first home to keep for 5 or so years then sell on and hopefully move onto a larger family home

worried_jim

Buy the biggest house you can afford.

kuratowski

Firstly, I would agree with everything said by AFF8879.

But I would also add, when thinking about stretching yourself - consider how you would pay the mortgage if one of you were to find yourselves out of work. And further, when buying a place, often there will be unexpected repairs and replacements you find you need - costing in the thousands of pounds - therefore again it's wise to leave some "headroom", to avoid going into further debt later on.

datlex

patch9495 wrote: »

Hi Guys

We are looking at buying within the next year, and was after advice regarding first time buyers

We are in a position to put down a decent deposit and still be able to afford to overpay the mortgage on our monthly salaries

Would it be wise to stretch ourselves to the highest value property the bank will lend us (whilst still being able to overpay a decent amount per month, and maintain our current standard of living), or buy a cheaper property and overpay more than we would on the higher value

My thinking behind this is if we can get a higher value property this will allow us to benefit on a greater scale if any capital gains occur

Thanks in advance

What area of the country? What size are you looking at currently? What size if goal?

AFF8879 wrote: »

5 years is the bare minimum I would rely on to expect capital gains, but even that is cutting it fine in these market conditions (depending on where you are in the country).

Normally, the whole point of stretching yourself on the FTB is to get yourself into a home you’d be happy in long-term. If you’re only going to stay 5 years regardless of the size of the home you buy then my inkling would be to opt for the cheaper property. But I have always been conservative with risk...

Edit: to add to this, normally the best way to add capital value is to carry out improvements rather than rely on the market. So if the cheaper property allows you to carry out some value-add work, even if it’s jist cosmetic, that is what I would definitely go for.

This makes sense, people do this quite often buy cheap, improve and make a bigger profit. Afterall, if your deposit is the same, the increased equity will be partly based on what you have paid off on the mortgage and partly what the increased value of the property is when you come to sell.

worried_jim wrote: »

Buy the biggest house you can afford.

Doesn't seem very money saving? Stretching self is never wise. Even assuming a 5 year fix and putting on market after 5 years no way of knowing what interest rates will be or indeed how long it will take to sell.

Firstly, I would agree with everything said by AFF8879.

But I would also add, when thinking about stretching yourself - consider how you would pay the mortgage if one of you were to find yourselves out of work. And further, when buying a place, often there will be unexpected repairs and replacements you find you need - costing in the thousands of pounds - therefore again it's wise to leave some "headroom", to avoid going into further debt later on.

Not over stretching makes a sense. You can always put money into savings as well to add to your future deposit or increase pension contributions.

Bossypants

AFF8879 wrote: »

Edit: to add to this, normally the best way to add capital value is to carry out improvements rather than rely on the market. So if the cheaper property allows you to carry out some value-add work, even if it’s just cosmetic, that is what I would definitely go for.

I would be careful about this. I wouldn't pay more for a shiny new bathroom that wasn't to my personal taste than I would for an old grubby one, and I don't think I'm alone in this. Sometimes work can add value, but I think the days of guaranteed profit going that route are gone.

patch9495

datlex wrote: »

What area of the country? What size are you looking at currently? What size if goal?

We are fortunate enough to find ourselves in a position where the choice is between a 2 bed flat 2 bed house or 3 bed house

South East London will be the location

Bossypants

3 bed house every time, you will have a broader pool of buyers when you come to sell.

mark55man

in SE London - the bigger the house the more the capital loss if things continue to go against you

if its for 5 years and you are looking to upsize then any gains and losses will inversely to your beneift - ie if things have gone up you will have made money but will then look to owe even more on a bigger property, but if things have gone down then you will have lost money but you will spend less on a bigger property

what makes you think you will be able to afford to overpay - and why do you think overpaying your mortgage is the msot efficient way to save money - Im assuming you are Higher rate taxpayers - shoving the overpayments into your pension will give you a 40% boost for you in later life

GoingOn30

What are your circumstances going to look like in the next 5 years? Are your incomes likely to go up? Are you planning on having children? Do you want to go on holidays/eat out or are you happy to live more frugally in order to prioritise the mortgage?
You cannot bet on capital gains if you're looking to buy in the South East. I'd advise strongly against stretching yourselves.