Max out mortgage, or go for a cheaper property?

Jonboy_1984

Don’t forget that with a flat you have to factor in ground rent and service charges. 

Service charges can vary widely, and for many people have sharply increased over the last couple of years with energy costs on communal areas going up etc. There can also be extra demands at anytime for section 20 major works in addition to the regular costs (communal gardening, energy, building insurance, statutory inspections, managing agents admin fees etc).

Also bear in mind if your ownership coincides with the lease dropping below around 85 years** you will also likely have to extend it to be able to sell the flat which is a stressful and costly process.

**Technically 80 years is the point things change due to marriage value, and get expensive but if selling the 80-85 year window you will likely get lumbered with the costs and a 6-12 month process (if you are lucky…)

jonnydeppiwish!

House again for me - you’ll never be able to accurately predict your own future. Probability of interest rates going back down to 1-2%? I’d say very unlikely. Maybe 4-5% and that may be come the norm - even when we first started to look the norm was 6%.

As others have said, you have a v good deposit, and long term it will be a good investment for your future.

propertyhunter

I'd buy a house over a flat for the reasons mentioned previously, but also consider what you think could be a family home might not be the family home your (eventual) partner wants, so you could end up moving anyway. Buy for your circumstances as they are right now, so if that means a house fine, but don't plan on it being the one your partner wants to live in. 

saucer

Definitely house for me.

justpassingthrough24

Thanks everyone for your replies. Since searching for more expensive properties, the rising interest rates have come down on me like a car crash. I'm now struggling to decide between these options:

1. More expensive property with a 40 year mortgage term (!), but aim to overpay slightly.
2. More expensive property with a 25-35 year mortgage term, but more expensive monthly payments.

With the new interest rates, I won't have the freedom to overpay by the ideal 10% each year. My fear is I'll be stuck on a 40 year mortgage paying huge amounts of interest for the rest of my working life. Again, I could just go for a cheaper property and get a shorter mortgage term but also don't want to sell myself short.

Any further advice would be hugely appreciated. Feel a bit like giving up and just continue renting at this stage  

propertyhunter

I would go for option 2. If you can't afford that, I would choose a cheaper house by compromising on the location/size/condition.

I wouldn't push the income to loan amount too much, as interest rates can mean your monthly payments can balloon. If I remortgaged today, my monthly repayment would be £1800 more. Luckily I'm fixed for 4 more years and when that ends will pay off £300k of the mortgage. As we're in an uncertain period (economically), I would plan for the worst case scenario regarding interest rates. Pressure test yourself to 10% (just in case - it's possible with our incompetent government). 

Edi81

House. Remember stamp duty is a sunk cost and will be payable at a higher rate (and may be more in future depending on what labour do when they come into power). 

Sarah1Mitty2

justpassingthrough24 said:

Thanks everyone for your replies. Since searching for more expensive properties, the rising interest rates have come down on me like a car crash. I'm now struggling to decide between these options:

1. More expensive property with a 40 year mortgage term (!), but aim to overpay slightly.
2. More expensive property with a 25-35 year mortgage term, but more expensive monthly payments.

With the new interest rates, I won't have the freedom to overpay by the ideal 10% each year. My fear is I'll be stuck on a 40 year mortgage paying huge amounts of interest for the rest of my working life. Again, I could just go for a cheaper property and get a shorter mortgage term but also don't want to sell myself short.

Any further advice would be hugely appreciated. Feel a bit like giving up and just continue renting at this stage  

Keep renting, a big multi-decade mortgage debt at this stage, when you believe house prices could "plummet" and the central banks are obviously committed to hiking rates would be a terrible decision IMO.

jrawle

justpassingthrough24 said:

Thanks everyone for your replies. Since searching for more expensive properties, the rising interest rates have come down on me like a car crash. I'm now struggling to decide between these options:

1. More expensive property with a 40 year mortgage term (!), but aim to overpay slightly.
2. More expensive property with a 25-35 year mortgage term, but more expensive monthly payments.

With the new interest rates, I won't have the freedom to overpay by the ideal 10% each year. My fear is I'll be stuck on a 40 year mortgage paying huge amounts of interest for the rest of my working life. Again, I could just go for a cheaper property and get a shorter mortgage term but also don't want to sell myself short.

Any further advice would be hugely appreciated. Feel a bit like giving up and just continue renting at this stage  

Of the two options above, I suggest going for the first and overpaying. That way, you can still pay the mortgage off in ~25 years, but the difference is, if you have unexpected costs to cover, you can choose to pay slightly less for a few months. You can always review the term when you come to remortgage after your initial deal.

Having said that, move generally, I would think about whether you can really afford this. It's not good to overstretch yourself. What if rates go up to 7%, 8%, 10% by the time you come to remortgage? You might think it seems unlikely, but so it seemed for all those people who took out huge mortgages at <2%, and are now complaining that they can't afford afford the current rates, and why can't the government pay their mortgage for them?

In my view, it's best to buy what you can afford, not what you feel you want. Many people want to live in a mansion in the countryside and drive a Rolls Royce or Ferrari, but they don't. I bought a flat for my first property, stayed there for just over 10 years, overpaid the mortgage, and then sold and bought a house. Few people these days expect to live in the same property for 25 years, let alone 40. I also had anti-flat prejudice before, but luckily I overcame that and it worked out well for me. I would ignore people showing such prejudice and do what works best for you. Renting is by far the worst option, though.

MultiFuelBurner

justpassingthrough24 said:

Thanks everyone for your replies. Since searching for more expensive properties, the rising interest rates have come down on me like a car crash. I'm now struggling to decide between these options:

1. More expensive property with a 40 year mortgage term (!), but aim to overpay slightly.
2. More expensive property with a 25-35 year mortgage term, but more expensive monthly payments.

With the new interest rates, I won't have the freedom to overpay by the ideal 10% each year. My fear is I'll be stuck on a 40 year mortgage paying huge amounts of interest for the rest of my working life. Again, I could just go for a cheaper property and get a shorter mortgage term but also don't want to sell myself short.

Any further advice would be hugely appreciated. Feel a bit like giving up and just continue renting at this stage  

With option 1 put your figures in here

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

Might make you feel a bit better