What is better: Buy a small home first and then upsize or wait and buy big house later

james_williamson_6544

Hello
Not a situation that I am in currently but over a Google Meet call last night with friends, we were discussing this topic as to what is a good financial decision

• to buy an OK size house as first time buyer and later upsize to something bigger, OR
• to wait until have enough money to purchase a big house at the start itself? 

If such posts are allowed by forum rules, please can we discuss and have some pros and cons of either of the approach... Thanks

grumiofoundation

Since the answer is dependant on your financial situation there is no real answer. 

RobM99

Depends on the property market I'd guess. IF prices whizz up then a bigger place might be out of reach.  IF prices plunge then a bigger place would be cheaper.

Who knows? Nobody.

csgohan4

personal circumstances will dictate the answer I'm afraid. One size does not fit all

elsien

In my circumstances it was buy what I can afford and stay there because financially, upsizing wasn't an option. 
ETA - although my house has increased in value, ones I would be looking at have also increased by similar amounts and my salary has changed little and is not likely to do so unless I change job. I like my job and don't want to go up the management ladder so that's the trade off. 

Wkmg

It depends how fast your salary rises, how fast the relative property prices rise and how long you would remain in the smaller property. I would say, in general you should buy what you can afford when you know you are likely to be in the same place for 5 years. There's always the risk you will be wrong. In general I think trying to game the system is likely to fail.

As a personal example, my partner bought a modest house 7 years ago. It has increased in value by 40% in that time. From her alone then to both of us now our income has quadrupeled. We are now selling her house, and buying a house a little under 4 x the price she bought her house for. We never would have been able to afford the house we are buying now without the equity we accrued by her house increasing in value. What I guess this shows is that even if you become far far better off, the typical rise in value of a house held for 5-10 years is probably going to be more significant in terms of purchasing power. Now obviously there being a big property crash can change things, winning the lottery can change things, living somewhere where prices don't go up very fast can change things but if you live in the South of England and the property market behaves like it has done for the last 50 years and as long as you aren't forced to move at a temporarily disadvantageouse time I would say that in general you're better of buying an okay house now and upsize later.

pinkteapot

The answer depends almost entirely on what the property market does, so no-one can say. 

If house prices rise faster than interest on savings (after taking into accounts the cost of doing an extra move), then you should buy smaller quicker. If they don't, you should wait to go straight to the big house. 

AlwaysPondering

Or option 3, get a mid sized house that needs some work. Slightly more that the small house (although might be the same depending on the amount of work required), and then do it up and extend as and when you can afford it. Assumes that the house is fundamentally liveable from day one though.

[Deleted User]

elsien said:

In my circumstances it was buy what I can afford and stay there because financially, upsizing wasn't an option. 
ETA - although my house has increased in value, ones I would be looking at have also increased by similar amounts and my salary has changed little and is not likely to do so unless I change job. I like my job and don't want to go up the management ladder so that's the trade off. 

I was the same. I bought what I could afford and was happy to get on the property ladder. There are only 2 of us and a cat so we don’t need a whacking great big house. I know a guy that bought beyond his means and from the outside of the house you would think he was well off. The reality is he can’t afford to furnish it properly and the council tax is crippling him.

MovingForwards

I purchased a really nice old 2 bed property, in a good area, borrowed 3x my salary, it meets my 'needs' and lifestyle.

I guess that's the benefit of being an older FTB, having lived in many properties over the years, knowing what I liked / disliked about them and what I wanted from my own home. Wasn't scared of seeing a survey, knew what to look at and check, not afraid of removing wallpaper or changing paint colours and over the years things will be upgraded to make it fairly retirement proof.

Oh and I'm planning to shave 13 years off the mortgage term because of having reasonable monthly payments 😁

Edit to add - I picked up all my furniture from a charity shop, including new bed / mattress, when in the last rental, knowing I would be using it all in my own home.

Negative equity doesn't bother me as I'm not selling, will ride it out same as as I do with my pensions and stocks & shares ISA.

Competsoph

I’m currently purchasing a 3 bed semi towards the top end of my budget. I am buying alone however my partner will be living with me and over the next few years will hopefully be put on the mortgage therefore our total income with expand.
I considered a 2 bed to start off with but I’m now 26 and hoping to start a family soon meaning that size just wouldn’t be big enough for us after a couple of years. Instead this 3 bed will be enough for us for at least 10 years and we can add our own stamp. The cost of moving twice outweighed my desire to continue renting and saving to find the house I wanted. It’s very individual to each person, as mentioned by everyone else!