Buy the most expensive you can afford? - am I being silly?

AlexMac

To paraphrase your post title....

"Buy the most expensive you can afford! - you ain't being silly" 

I know that "the past is no guide to the future"... But...That's wot I did; effectively skinting myself to buy a wreck at a time when interest rates were about 10%p.a. ...  

...at exactly the same age as you

... in 1975... it cost a then eye-watering £10k (yes, ten grand). 

Never regretted it.  Mortgage rates peaked in the subsequent decades- sometimes almost 15%... but I got through.

Glad I did, as we're now sitting comfortably on well over a mil in equity.  With a tiny mickey mouse mortgage rate which means it's not worth paying off out smallish interest-only loan (we could have done, but used it for a second BTL 10 years back- another winner).

OK, as others say,  a house is a home, not an investment, but it's the best tax free appreciating asset I've ever had.  One house I owned in the inflation crazy late nineties had appreciated more p.a when I sold it after the Millenium than the net annual salary I'd earned at work in each of the three years I owned it!  That ain't gonna happen again, but on the other hand, I'd bet money that in the next couple of decades, we ain't going to see the BoE base rate peak at just under 15% like it did in late 1989.

So go for it (not that anyone in their 20's should take advice from us wrinklies; doncha just hate Boomers?). 

Very best wishes for the future

TXC

Thanks so much everyone! Definitely a lot of food for thought! Viewing the house tomorrow so will keep you updated!
Its on for a good 20K more than zoopla's estimate so it may well get downvalued should we even get that far - although would never ever base my sums on that (!)

Mickey666

JJR45 said:

Mickey666 said:

Whatever the OP decides they'll be laughing at the price they paid in 5 or 10 years time, their career will likely have progressed and their salary will likely have risen way faster than their mortgage repayments so they'll have surplus cash each month to spend, perhaps on paying down the mortgage early.

Depends on how much you laugh though.
I was certainly happier buying a new build in 2008 for £250K, than the other people who purchased the same houses off plan for £340K a  few months earlier. They have only just got back to the price they paid for them,
So although generally, property appreciates over time. There are winners and losers in every cycle, and people's circumstances can change. So generally maxing yourself out,  carries the most risk.

But that's the key point isn't it?  They've not lost out already and they won't have lost out by the time they've paid off their mortgage and can live the rest of their lives with no housing costs.

Sure, you've gained a bit more than they have but no one has lost out.  Not so much winners and losers than winners and bigger winners.  No one has yet disputed a previous poster's claim that there has never been a 20 year period over which house prices have not risen.

And yes, people's circumstances can change, but that works both ways. In the OP's case, they are young, in a good job with good promotion prospects, so their circumstances are likely to change for the better.  For people whose circumstances change for the worse there's always the option of moving (whether they buy or rent), but at least those who bought are likely to have have accrued at least some equity, unlike anyone renting.

Mickey666

sammyjammy said:

If the value of your house had dropped 10% in the first 12 months of living there how would you feel?  That's potentially the only issue I foresee being a possibility, If that wouldn't bother you go for it.

So what?  Forget about house prices, they are not the most important thing in terms of having a home to live in - which we all need, right?

You have two basic choices of funding a home - rent or buy, where buying means monthly mortgage payments.  Broadly, both forms of monthly payment are the same but one is paid every month for as long as you live while the other is paid for a period of time after which you own the house and have no further monthly payments.  Ever.

Note that I've not even mentioned house prices or whether they go up or down, because they don't change anything above - pay monthly forever, or for a defined period of time.  So, given that choice, why WOULDN'T you buy instead of rent?

lookstraightahead

I have to play devils advocate here and ask all those who bought when they were really young - did you stay in the same house / area or keep selling and moving on? I Also luck does play a part - divorce, redundancy, illness etc.
I did buy young, it was a noose round my neck as I passed up opportunities to work all over the country / world and earn a lot more money, taking advice from those who put the value of their house before anything else.

Neither way is right or wrong, and this is a money saving website 👍 but sitting on a house, in the same place, for years and years, can impact your lifestyle/prospects choices as well.

TXC

lookstraightahead said:

I have to play devils advocate here and ask all those who bought when they were really young - did you stay in the same house / area or keep selling and moving on? I Also luck does play a part - divorce, redundancy, illness etc.
I did buy young, it was a noose round my neck as I passed up opportunities to work all over the country / world and earn a lot more money, taking advice from those who put the value of their house before anything else.

Neither way is right or wrong, and this is a money saving website 👍 but sitting on a house, in the same place, for years and years, can impact your lifestyle/prospects choices as well.

thank you that really does make sense and I'd definitely get insurance of some sort to protect against illness etc. just to add a bit more colour to my situation I moved away from lpool and spent six years down south (I moved county every 18 months chasing step up jobs - and two in France) building my career,  made a conscious decision to come back and stay back last year as I was ready to happily be in my hometown for the forseeable. Never say never etc but I feel my nomadic days are truly behind me now! never been happier location wise

The_Real_Cheddar_Bob

I haven't read the entire thread, so if this is a repost I apologise. 

I'm not a fan of income/illness insurance. (i have life - mortgage requirement) We have become nation of insurance for everything. 

Consider this, the most expensive house may not be the right house for you. (biggest, smallest, location, etc.)
Buying the biggest house you can, or most expensive when you are young buys you time to sort things out. You do however need to make sure you are more in the earn £1, spend 50p than the usual, earn £1, spend £5 crowd. (in brief you need to spend less than you earn.)
I consider mortgage debt not to be debt, as you need to live somewhere and you would need to pay rent, so i generally forget how much it is i owe. (£440k). My mortgage is stretched out for as long as it possibly can be with the lowest monthly payments. I do not make overpayments. EVER. I am not interested in trying to reduce the lifetime interest payments today, I am interested in building wealth. I define wealth from a book i read, someone might quote the title, but being wealthy is being able to survive without income in a number of months. EG you have 1 years worth of money, thats 12 months wealthy. The fact your mortgage would eat the whole lot up in one go is irrelevant, you just don't give it to the bank. 

Now if interest rates were much higher, id take a different view. 

So in my opinion, buy what you can afford, fix your mortgage for at least 5 years if you are at the upper limit, put any extra in an account for you and don't spend it, its extra, not savings for spending. (extension / holidays/ cars/ nothing) use other money for these. If you don't have other money, you can't afford the house you are looking at.

If you get ill, and if its serious, your life insurance will pick up the mortgage bill and your family will benefit. If you are too ill to work, in the short term, use your funds you have been saving and if it was a very long illness you would lose your home (more than likely) anyway, so ride that wave and let the system catch you. (it won't be pleasant but its there.)

Lots of people including me will tell you how to spend your money. My only word of advice, and from experience, do not wipe every penny out you can and expose yourself to hand to mouth living. 

jimbog

lookstraightahead said:

I did buy young, it was a noose round my neck as I passed up opportunities to work all over the country / world and earn a lot more money, taking advice from those who put the value of their house before anything else.

I bought young and rented it out when I went travelling and working abroad. It doesn't need to hold you back

getmore4less

lookstraightahead said:

I have to play devils advocate here and ask all those who bought when they were really young - did you stay in the same house / area or keep selling and moving on? I Also luck does play a part - divorce, redundancy, illness etc.
I did buy young, it was a noose round my neck as I passed up opportunities to work all over the country / world and earn a lot more money, taking advice from those who put the value of their house before anything else.

Neither way is right or wrong, and this is a money saving website 👍 but sitting on a house, in the same place, for years and years, can impact your lifestyle/prospects choices as well.

I bought a new build  house ~£20k
4 years later I moved jobs to a new area.
My place was still worth around £20k.

Pretty much same style house new area also 4 years old was £44k
Bought as a new build ~£20k

No noose smart move was take the better job.

Same houses now.
Will get back when I have looked them up.

My big mistake was not keeping that property when we we up sized to the next one.

Mickey666

jimbog said:

lookstraightahead said:

I did buy young, it was a noose round my neck as I passed up opportunities to work all over the country / world and earn a lot more money, taking advice from those who put the value of their house before anything else.

I bought young and rented it out when I went travelling and working abroad. It doesn't need to hold you back

Exactly right.  I know of at least two young people (late 20s) doing precisely that - one letting out on an airB&B basis and one letting out on a longer term basis through an agency so it takes none of their time or effort.

So, far from holding them back, these houses are investments for the future when they want to settle down after travelling the world and working as free spirits, plus actually providing them with some income each month.