How far to stretch myself advice

I know this question is fraught with personal circumstances but I'm unsure how far to stretch myself in a house purchase.


I am 39, divorced, and saved £26k in total for a house deposit which has taken several years to achieve. I am currently renting, on my own as no new partner in the frame. I have a £6k credit card debt which I could pay off any time from the deposit funds but its on 0% deal, so I considered it better to keep the cash. A lender may or may not care about this, the debt is more than manageable, and I felt the value of having cash for a larger deposit outweighed paying it off.


I obtained a mortgage in principle for £160k but it stated I could possibly lend up to £200k. I have enough deposit to do this and keep a 90% LTV.


Obviously the more I'm willing to spend the nicer house I can get.


The more I spend, the more stamp duty I have to pay, and the more council tax will be, and the more the mortgage payments will be obviously. This means I'll have less disposable, but its all doable with varying degrees of sacrifice on my current lifestyle, which as a single person does still involve going out occasionally.


I also understand that the more I stretch myself the more risk I take if the worst should happen regarding my job or my health.


As Im doing this all by myself, I don't really have anyone to turn to for advice on how far to stretch myself. Longer term I'll benefit from having a nicer/bigger house.


I'm also concerned however about buying at this time, especially if I stretch myself, because everything is so inflated. But things don't look to be changing in that regard. Every property I liked the look of over the last 3 months has sold, on rightmove.


Uncertainty also exists because I am in relationship limbo. Being single, I could in theory move anywhere if I was to meet someone. This possibly should indicate I should buy a cheaper property that would then be less of a liability should I wish to sell it.


I don't know if this is the right section for this at all, probably isn't, and I know it goes beyond money saving. But like I said, I don't have anyone to get advice from on the subject.


Any opinions appreciated. Anyone else been in similar position?
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Comments

  • MortgageMamma
    MortgageMamma Posts: 6,686
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    Hi There Dan,

    I think you would benefit for an income and affordability assessment so you know you are within your comfort range. Us brokers do this by asking you about your current expenditure, having a look at your bank statements (a mortgage lender would look at these too) and seeing how much disposable income you have left. Then we would help you factor in things that are important to you, such as costs for holidays, gym membership, socialising/dating etc. The idea of this is to work out what you are comfortable with as well as what a lender would typically allow you to borrow.

    I think regarding your future type of property you need to focus solely on yourself right now rather than what might happen in the future. Life is too short to put things off or make preparations for if a relationship occurs. If you do meet someone special you could always rent out your property, it is easy to do this you can get consent to let from your mortgage lender until you get to the point on your mortgage deal where you could remortgage to an official buy to let mortgage. You may want to think hard before doing this though as being a landlord is a huge responsibility.

    A good way of finding middle ground on this potential problem is maybe not to tie yourself into a long term mortgage products which would penalise you financially for selling before the end of what is called an incentive period (or early repayment charge period).

    Happy to help
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • danlightbulb
    danlightbulb Posts: 929
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    edited 19 March 2019 at 5:54PM
    Thanks for the reply.


    I have done some budgets, a basic one when I got the MIP but I've also done my own more detailed ones. Since I did some budgeting with the help of this forum several years ago now I'm really on top of my outgoings, I record/track everything.


    All options are affordable as in they all result in a surplus of income, but by lessening amounts as I up the purchase prices. So Im choosing between having a bigger/better house or more disposable income to spend or save. I could do either.


    In terms of need, there is only me. So I could, in theory, live in a tiny 2 bed house and have loads of disposable. I don't need a lot of upstairs room at all, but I desire more downstairs space than a typical 2 bed or 3 bed house provides. I'd like a reasonably sized kitchen (many houses even at my max budget have tiny kitchens), a garage accessible from the house (quite rare also) and an additional downstairs room for a home gym.


    So in order to get this (3 downstairs rooms, decent kitchen and garage) I'm generally into 4 bedroom territory which I don't need.

    Im also a bit concerned about buying a house at the ceiling price for the area/street, as this presumably is more risky if things move.
  • stator
    stator Posts: 7,441
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    I was spending X amount on rent, and I now spend the same X on my mortgage.
    But I have a lot less cash because houses are stupidly expensive
    I don't regret buying because I was fed up with landlords and now I am free.



    You never know where interest rates are going to go, or if your insurance costs will go up massively, so I would say stick with a modest house that meets your needs and don't stretch yourself too far.
    Changing the world, one sarcastic comment at a time.
  • MortgageMamma
    MortgageMamma Posts: 6,686
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    How about having your Gym upstairs in one of the spare bedrooms or in the garage and then buying a two bedroomed house?

    I don't know what the area is like where you are buying but I do know with most house moves there is a lot of compromise involved.

    You could even buy a summer house and put your gym in that. And access to a garage from inside the house itself can be created fairly cheaply.

    You could also buy a house with two reception rooms separated by a corridor not open plan, and use one of those as a kitchen and use the original kitchen as a small gym or utility room.

    Just get the best you can for your cash and think about if you could buy something cheaper and make the changes gradually yourself.
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • danlightbulb
    danlightbulb Posts: 929
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    edited 19 March 2019 at 8:17PM
    Thanks. Yeah I am trying to keep an open mind, but I would say 99% of the houses (West Mids) are the bog standard through lounge/diner and kitchen downstairs. Very lucky to find anything with any more interesting downstairs layout. I also own a piano, so need some decent downstairs space really. I care more about downstairs space than bedrooms. I'd like a decent size garden too, again because it will give me something to do. That rules out all new builds and anything newer than about 20 years old or so.


    Gym upstairs is a no go unfortunately because Im into barbell training.


    Its difficult to work out my priorities for the house really. The issue with doing any building work/aterations is that I'll be burning most of my deposit on the purchase itself, which leaves little for alterations. Its took years to save up the deposit, with alot of help from an extra income source as well so that won't be a sustainable level of savings in the future.
  • Bear in mind you might meet someone where you end up living and they can move to you or are already in the same area as you. Focus on what you need right now and compromise from there.
    "Everything comes to him who hustles while he waits" Thomas Edison
    Following the Martin mantra "Earn more, have less debt, improve credit worthiness" :money:
  • System
    System Posts: 178,077
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    The answer is simple. The more you stretch yourself the less capable you are of dealing with any change be it from short term or long term illness, being made unemployed for whatever reason or mortgage interest rises beyond a percent or two. This is because you have less disposable income to build up an emergency fund and not only that, the emergency fund is going to need to be larger to account for the higher mortgage repayments.

    Spending more doesn't guarantee a nicer house, especially when you take the location into account. I know someone who lives in a house 2 minutes from the railway station in High Wycombe in a house worth almost half a million quid but it wouldn't look out of place in a council house estate in Hull whereas half a million quid where I live buys a 5 bed detached house in an acre of grounds.
  • Yes Im finding wide variation even in the small area im looking in. Some houses are way way over valued, I wouldn't buy them for half the amount they are up for.


    Here are some examples:
    1. https://www.rightmove.co.uk/property-for-sale/property-60927024.html


    and 2 miles away:
    2. https://www.rightmove.co.uk/property-for-sale/property-50386059.html


    I know the area well round here. There is no difference big enough to justify that difference in what you are getting for the same money.


    £210-£220k is a stretch though.


    My rent right now is £570. A £150k mortgage (circa £170k property with £20k deposit) would be similar according to current rates (c. 2% on a 2yr fix). After budgeting everything else this gives me a disposable of £700 not including socialising, gifts or holidays. Not seeing a lot I really fancy for that price range.



    I'd be looking at only around £120 ish more for a £185k mortgage on a £205k property, but presumably extra council tax etc as well (although ive noticed bands aren't consistent either). After budgeting this gives me disposable of around £530 not including socialising, gifts and holidays. I'm seeing a few I like at this price range.



    On the face of it both doable. But if rates were to rise I'd be in more trouble on the bigger mortgage obviously.



    Part of me feels like its a bit wasteful, going for a property bigger than I really need. But another part of me feels I don't want to even buy something in the lower range because Im selling myself short.
  • jlaw4
    jlaw4 Posts: 122
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    Hi Dan,

    i was in a similar situation myself and was convinced that going to the top of end of affordability would get me a better house, i had a £30k deposit so thought spending most of it would get me a dream house.

    I started looking and actually found the mid price houses were better sizes and weren't inflated due to being nicely decorated. i've now got one thats under £120k and is much bigger and nicer than lots of others i looked at.

    go and view them as theres nothing better in finding out what you truly want in a house until you start looking. its often not what you first thought!
  • getmore4less
    getmore4less Posts: 46,882
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    edited 20 March 2019 at 9:15AM
    I get the feeling from your first post that a new relationship is something quite important to you maybe not now but some time.

    How much to let this influence your choice is difficult, I would go with a place big enough for a partner to keep that option open, go too small and you have to move even if they are local.

    Anyway back to the house situation.

    I am with you on decent downstairs space and we had to go 4 bed to get what we wanted

    One thing to add to the consideration with the larger upstairs is the option to take a lodger.

    With 2 spare rooms upstairs and at least two bathrooms you can keep some privacy and even look at a Mon-Fri to keep even more.

    Another potential solution to downstairs space is double garage to have car/storage and gym space.

    I will have a look at the area based on your 2 links.

    How far could you go from this area?
    Any other key factors like near a station(commute) or town(social)?

    why the need for a garage?
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