Worth going for a bigger mortgage - first time buyer

davidw123

Hi,

Just a quick query as a first time buyer. Me and my partner are looking at two plots on a new build small new build site. The houses look gorgeous and our favourite is the more expensive one which for 20K more gets you a detached home, integral garage and utility room. The cheaper, despite only being 20K offers no gargage, no utility and is a semi.

We earn a combined amount of 53K, the expensive house in question is 240K and we have a 18K deposit. we would get a 20% government sceme which would be 48K. This means our mortgage would be for 176K.

Ive not read too much but I just wanted peoples thoughts on going for a bigger mortgage, especially for our first home when we can take advantage of both the current climate and the government scheme. (we would definitely keep this home long-term whilst the cheaper version would probably only last us 5-10 years before we outgrow it.

Also worth noting the bigger house comes with flooring, appliances built in, whilst the smaller does not.

If you could offer any advice or opinions that would be great :j!:money:

ACG

You probably would not need to take out the equity loan if you did not want to.

If it will be a long term home, then I would say go for it. Your done then arnt you, no more moving costs/legal fees etc. If you were only going to be there for 5-10 years, I would say probably the cheaper one and then hammer down the mortgage.

ReadingTim

A bigger mortgage = larger monthly repayments, so suggest you want to consider some of the following:

• ability to meet monthly repayments in fixed rate period
• ability to meet monthly repayments when out of fixed rate period (ie SVR) or at a rate of interest +2% more than it currently is
• confidence in the security of employment over the next 2-5 years
• any anticipated pay rises in the next 2-5 years over and above cost of living rises (ie 5%+, not just 1-3%)
• 'life events' likely to significantly affect income or expenditure - getting married or having children for example
• extent to which you're willing to tolerate a reduced standard of living (fewer, cheaper holidays, older car, fewer meals out or takeaways etc) in order to live in a nicer house

davidw123

Hi Tim!

Thanks for the response

I completely agree, and its something were trying to deliberate over. Regarding employment that should be fine and life events were due to get married in August and everything is paid of with 0% deposit for us on both sides...

Our biggest gripe is we know new builds are overpriced already and often result in negative equity, the fact that the cheaper house offers such less for 20K is a prime example of this and feel the more expensive house softens the blow... but thank you, you have given me stuff to consider.

Any more opinions would be great, the more the merrier.

Silvertabby

We bought, as first time buyers, in the mid 1990s - and we faced a simlar dilemma

In our case, it was between a 3 bed detached (£75K) or a 4 bed detached (90K)with a separate utility room and a much bigger kitchen and lounge.

No 'help to buy', and mortgate rates were over 7% - but we had been living in Armed Forces married quarters and so had been able to save a big deposit.

We went for the 4 bed and have never regretted it. What really tipped it for us was the separate utility room (kitty litter tray for the use of) which sounds a bit extravagant - but the smaller 3 beds now seem very cramped and I think we'd have moved after a few years instead of staying (happily) where we are.

davidw123

Thanks SilverTabby - thats one thing i was also thinking of, buyers regret. Always "I wish i had done this" and not only that, but the poor man pays twice attitude where i could also end up doing up a house, and then by the time its sorted grow out of it.

Thanks to everyone and further opinions are still greatly appreciated, id like to hear both sides

[Deleted User]

My OH and I are on a combined income of less than you (probably 44k before tax) and have a mortgage of 150k. We get by fine with money leftover at the end of the month to put away. In hindsight, I think we could have afforded a bigger mortgage, but we didn't want to stretch ourselves. We also love our house so have no regrets about it.

It sounds to me like you have your heart set on the bigger house, so my advice would be to go for it.

I must add though that we also don't have extravagant spending habits. I rarely buy new clothes/shoes, and when I do I go to cheap shops like Primark. Neither of us have expensive hobbies and we don't eat out at restaurants often. A lot of what you can afford does come down to personal spending habits.

MalcRH12

I would go for the detached 100%. More of a long term house and no need to move again. 20k is not a huge amount more for the privilege. Go for it.

99bottles

Remember that after year 5 you'll pay the administration fee of 1.75% + £1 per month. Which increase at rpi + 1%.

Your £60k will require a fee of £1062 in year 6 and with a 5% rpi will cost you £1128 in year 7.

A few people are now complaining that some mortgage companies aren't allowing additional borrowing to pay of the help to buy

hazyjo

Personally, I'd buy a 'second hand' house without the help of any scheme. Would prob be bigger, on an established road/estate, and I'm sure you'd get more bang for your buck (with no new build premium).


Don't get too swayed by shiny new things. As soon as you move in, they'll be second hand. Might be cheaper to buy elsewhere and spend £10-15k on something like a fabulous kitchen that would prob be bigger than the new build.


Maybe just have another thorough check through RM and think about spending the same, but putting some of the money towards upgrading the house.

bouicca21

Whilst personally I’d not go for a new build, my main reaction to OP is Londoner’s one - you have the possibility of a nice house dirt cheap and you really worry that it’s a whole 20 grand more than than an even cheaper one?

Stretch yourself now. You’ll regret it if you don't.