Whats the best option?

Barmy_Army_92

Hi, 
I am 27 with 82k saved in cash. I have plans to purchase my first home in the next 6-18 months, personal circumstances depending. In my area, a pleasant, 3 bed victorian terrace can be bought for under 150k. I think me and my partner could probably purchase such a home, live comfortably with easy to meet mortgage payments and have the mortgage paid off in under 10 years. However, it wouldn't be where we wanted to live forever, does it therefore make more financial sense to go for a house on the 2nd rung of the ladder straight away? In 10 years time would I be any better off for owning and letting out the terrace, and having a 25 year mortgage on the semi which we could get now with a 35 year mortgage [for the same price as our current monthly rent]. 

Any advice would be greatly appreciated. 

Comms69

In 10 years time the economy might be in the sewer, or might be booming. If anyone here knew that; frankly they would be sipping cocktail on a yacht.

Generally speaking your options are going to depend greatly on your job security. 

princeofpounds

Borrowing more to buy a bigger house basically increases your exposure to property prices. That can be good, if prices rise, and bad, if prices fall.

Quick example:
- You buy a property for 180k. 80k is your equity deposit, 100k is your mortgage.
Prices go up 10%, let's assume right away. Your property is now worth 198k. Your mortgage is still 100k. Your equity is now 98k, up 23%. 

- You buy a property for 280k. 80k equity deposit, 200k mortgage.
Prices go up 10%. Your property is now worth 308k. Your mortgage is still 200k. Your equity is now 108k, up 35%.

And vice versa if property prices fall.

Obviously the real world is far more complicated. Your income to support the mortgage may be more or less risky. You may or may not let out rooms. The mortgages may cost different amounts etc. But this effect is going to be a primary determinant of your returns, and no-one knows what property prices will do.