To buy or not to buy?

R.O.S.S.I

R.O.S.S.I

R.O.S.S.I

Soldato
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Both myself and the gf both still live at home with our parents and have been saving for a house for some time. We both desperately can't be bothered living at home anymore and have managed to save a decent amount of money over the past few years so we have an OK'ish sized deposit but i'm trying to weigh up the pros and cons of moving out now and the pros and cons of moving into a more expensive house.

We're at the point where we could afford to buy a 2 bed mid terrace and have a mortgage of no more than £350-£400 per month due to the deposit we've got. If we moved into this house our expenditure would only go up by an extra couple hundred a month each than what we're paying now when we take into account all bills etc so we'd still have a lot of disposable money spare to save/spend/whatever, which is also helpful as the Mrs is learning to drive and no doubt when she passes and gets a car that is going to swallow a lot of her money.

Now the predicament is I ideally would like to move into a semi-detached house with a drive etc but for anything remotely decent we're looking at about 35k more at the very least, which shoots up our mortgage repayments (on our current deposit) and would probably mean we are a lot skinter once the Mrs starts driving etc.

Now the question is do we wait it out another potential 18 months and keep saving so we have a bigger deposit or do we crack on with getting the cheaper house with a cheaper mortgage (which we plan to overpay on a bit) and then look to move in 5 or so years when we've got some equity back in it?
 
Tricky decision because it really depends on whether house prices go up or down. But if we assume for the moment that they stay flat, then you should consider the cost of moving each time which is very expensive indeed.

So if you think property in your area will stay flat or go down then wait. But if you think it will go up then buy now. In most of history (but not all) it has gone up.

Just like having a baby there is never a "right" time. On balance I'd say "go for it". But there is no right or wrong answer really.
 
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In 2 years houses may have inflated a little and interest rates may have gone up a little. It is unlikely the inverse will happen. So you can save more but some of those savings will be offset in other costs.

Moving out form the parents will always cost more, no 2 ways around it. It is never good financially to move out unless your parents are trying rip you off. But what you gain in freedom only you can out a figure on.

There is also the point that when you have a mortgage to pay (and that mortgage is a good chunk of your takehome) you might end up financially more responsible. Expensive nights out drinking yourself into the gutters becomes a rarity, you revaluation designer clothes vs supermarkets specials, expensive phone upgrades might give way to putting up with your old phone for another years. This is all actually good things. You waste less money and will try to be. Ore optimal so you can pay off more of the mortgage. So a bigger mortgage. If hit see you you waste less money.


Personally, I can last about 2-3 days at the most with my parents, let a poem the in laws so I would move out ASAP and join the adult world. If you can buy a cheaper house with a cheap easy mortgage allowing you to save up more for later (or over pay) then that is ideal. You can never afford your dream house as your first, you have to move up the ladder. No point waiting until you can afford a big house (whole know, if you loose a job then it. I that take a long time to afford, or if you have it then you may no longer afford it...).

I prefe a cheaper house with a stress free mortgage and healthy bank balance, good or sin contributions and the prospects of upgrading in 5 years etc.
 
I think you need to create a spreadsheet with your current income and expenditure. There are more costs to consider than just the mortgage cost, such as:
Electricity
Gas
Bins
Council rates
TV licence
Insurance
Broadband
Maintenance
Water charges
Sky
Service charge

Once you calculate the above for both the terrace and Semi-D situation, then you need to compare these to what your existing monthly payment to your parents + monthly savings add up to. This is the most basic affordability test. You should also identify where you can cut down spending, but if you've been saving for the last couple of years I assume you've done that.

Next thing to consider is cost of buying - stamp duty, solicitors, moving, appliances, furniture etc.

I think the whole property ladder thing is a bit of nonsense and you're far better waiting to afford something that you want rather than just buying what you can afford.

Btw if your gf passes her test, no need to get an expensive car. A cheap Fiesta or similar will do the job nicely :)
 
Get on the ladder now and move when you need to. Not many people buy a semi in a nice area as their first house.

Presumably you're still young and your wages are likely to rise over the next few years with promotion/ job change if you get your head down.
 
You need to do the maths and work out the relative costs and see what you can cope with, personally I'd rather have less money now and not have to move again in a couple of years when you grow out of a 2 bed terrace. When doing the maths, don't underestimate the cost of white goods and basic furniture that you will need, we set aside a fairly hefty budget and it disappeared very quickly.

We were in a similar position when buying our first home a year ago, do we go for an easily affordable 3 bed semi or push ourselves to a 4 bed detached. In the end we felt that we would rather buy the 10 year home, rather than the 3 year home, stamp duty was a big factor for us (not wanting to pay it twice in 3 years when it would have been in the region of £8000) and also the market round here is going up quickly and we felt that if we waited there would be a good chance that we would not be able to afford the bigger home in 3 years time.

It's tough initially and it means that we've had to cut back on other areas such as eating out, holidays and cars but in the long run we think it will be better for us.
 
We're both still relatively young (27, 25) and have no plans for children at all in the next 5 years (not even sure if we actually ever will want them). We probably would consider a move to a bigger house in 5-10 years if we had kids and/or we got inheritance money.

We've still got heaps of furniture from when we had a flat so should see us through the first couple years of house ownership before she has her way and insists on matching everything. And as I said before I've already totted up what new furniture and appliances would cost in a worst case scenario and we can cover this too quite comfortably.

The monthly costs to cover all mortgage, bills, food etc is miles less than we're putting away each month saving for a deposit, so in that respect i'd actually be better off (if that makes sense). Id be able to cover bills, still save money and also have extra disposable income each month compared with when I am at home at present paying rent to parents and saving for deposit!

Just seen a house we really like as it happens and ticks a lot of boxes for us. Has been on the market for a year or so with a couple of agents but when I phoned through they said they vendors have taken it off the market which is a bummer!
 
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If a house has been on the market for a year in the 'Current Climate'(TM) I would guess either there is something hiding under the covers that has put prospective buyers off, it has been overpriced, or is just quirky / in need of redevelopment and thus only appeals to a small market.

Anyway as for the original question, personally I would buy now if you know the area i.e. not taking a risk on that front. If you have your heart set on a bigger property and it is only another £35k then I would go for it, that is a very small premium compared to a lot of areas where you would be talking six figures easily for that sort of upgrade. By the sounds of it you have the money it just means less disposable income. I've made the mistake(?) of buying inferior properties in the past due to not wanting to over-extend or pay for space we don't need and then sit there wondering what could have been.

I say push the boat out but consider getting a long-term (5+ year) fix to hedge against potential rate rises. One would hope by the time that runs out you will have better jobs, plus it sounds as though you may be expecting an inheritance one day.
 
Rather than saving up for 18 more months, can you get some help with the deposit from the bank of mum and dad? if you were planning to overpay anyway and you would be able to afford to pay them back instead of the mortgage it's not a terrible idea to do it.
 
HangTime said:
If you have your heart set on a bigger property and it is only another £35k then I would go for it, that is a very small premium
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Quite.

OP says there's more disposable income once buying the cheaper house, so adding another £35k mortgage debt isn't going to dramatically change that - £150 pm or so on a 25 year term with a bit more stamp duty to add up front.

£40 a week or just over a fiver extra per day for the house you really want.
 
That is a fair point and is something we're going to consider. Was speaking to a mortgage broker yesterday who is going to get some info over to us on what he feels is the max we can borrow and the kind of rates/repayments we can expect on a variety of different house prices/deposits.
 
3x joint income is a good rule of thumb.

If you're young don't be afraid to 'max out' even if it seems difficult now. Your income should go up and you will find it's not so bad later on!
 
chanjy said:
3x joint income is a good rule of thumb.

If you're young don't be afraid to 'max out' even if it seems difficult now. Your income should go up and you will find it's not so bad later on!
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Yeh the houses we are looking at are under the 3 x joint income (by quite a way in some cases), just depends on what sort of house we end up plumping for.

We've had a decision in principal off a broker for an agreed amount however they did state we could potentially borrow nearly double what the decision in principal was (not that I ever would).

I think what is scaring the GF is the cost of driving and the impact this might have if we go for the more expensive house (not necessarily the car, but the insurance etc). However, she is more likely to receive pay rises than I am and with the way things are going she is climbing the ladder nicely, I've just recently moved into a higher paid role at my current place of work so a salary increase is off the cards for the next couple of years (unless I jump to another company!)
 
One way of keeping payments low is to get the mortgage over 30 or even 35 years. When you get your pay rises start overpaying/ remortgage so you minimise the interest you pay
 
chanjy said:
3x joint income is a good rule of thumb.

If you're young don't be afraid to 'max out' even if it seems difficult now. Your income should go up and you will find it's not so bad later on!
Click to expand...

That's reasonable advice. Personally, being a little older these days (just turned 40) and having less mortgage and less job security, myself and my partner didn't look so much at income multiples but more at what we could afford - specifically what we could afford on one income.

We're a relatively cautious couple, and based our affordability on what we could sensibly afford to keep if one of us lost our job for six months. So when we bought our house we kept some cash in the bank and then made sure our mortgage payments could continue to be paid if we went down to one income. It wouldn't be pleasant - in fact if that scenario had happened when we first started it would have been absolutely ****ing horrible and difficult to keep the house, but we figured we could so it with some extreme sacrifices.

If you're confident that your situation will improve from that point then it will prove to be a very firm foundation on which to start buying and then paying off your home. 8 years on and one move (and mortgage increase) for us and we've got to the point where we consistently overpay the mortgage. But, with the wisdom of hindsight, my other half will be made redundant next June and although it will be difficult then, we will be able to keep our house far longer than 6 months if she doesn't find work again.

Just find out what works for you and what makes you feel financially secure.
 
The_Abyss said:
That's reasonable advice. Personally, being a little older these days (just turned 40) and having less mortgage and less job security, myself and my partner didn't look so much at income multiples but more at what we could afford - specifically what we could afford on one income.

We're a relatively cautious couple, and based our affordability on what we could sensibly afford to keep if one of us lost our job for six months. So when we bought our house we kept some cash in the bank and then made sure our mortgage payments could continue to be paid if we went down to one income. It wouldn't be pleasant - in fact if that scenario had happened when we first started it would have been absolutely ****ing horrible and difficult to keep the house, but we figured we could so it with some extreme sacrifices.

If you're confident that your situation will improve from that point then it will prove to be a very firm foundation on which to start buying and then paying off your home. 8 years on and one move (and mortgage increase) for us and we've got to the point where we consistently overpay the mortgage. But, with the wisdom of hindsight, my other half will be made redundant next June and although it will be difficult then, we will be able to keep our house far longer than 6 months if she doesn't find work again.

Just find out what works for you and what makes you feel financially secure.
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We did the same, if either of us becomes long term unemployed then the mortgage is such that the other won't have issues paying it. No risk in loosing the house then and saying goodbye to our lifetime savings.

The upshot is that we can easily overpayment the mortgage, keep our pension contributions healthy and still put money into savings schemes. The second plus point is the down payment is a much bigger proportion of a cheaper house and so the actual LTV becomes much lower and interest charges are a lot less. E.g. If you have a 40k deposit and compare a 100k house to a 130k house, although the more expensive house is only 30% more the mortgage principle will be 50% higher and so the interest costs will be proportionally higher.

In 5 to 10 years time you can might have paid off the mortgage and halve healthy savings to upgrade, while suffering minimal costs. The extra interest on 40-50k over 5-10 years is much more than the cost of changing houses.


The other things to consider is you can never buy a dream house when starting out, and even if you had the money you won't really know exactly what you want. Similarly, you never know where you will be in 5 years anyway. Maybe you have moved to oposite ends of the country or to the otherside of the world, forcing a sell anyway.
 
As others have indicated:

1. Draw a line from now till your 75. Next mark in 2+ kids before your gf is 35 (realistic age tbh)... then add 25 years of kids on to that.. when you're looking todo X & Y & Z as life choices...
2. Create a spreadsheet over 5 years - this is your financial stuff - each month show fixed costs (i.e. things that aren't going to change in that year) and variable costs (things that vary on usage) .. add in council tax etc.. but also factor in a 10% increase in heating bills over each year.. Your take home should also factor in pension etc.
3. Now look at your saved about and how much loan-to-value (LTV) it gets you.. remember you need to pay the bills, to live and also then pay the mortage+life insurance etc.. look hard at (1) plan.. can you afford it if one gives up job for kids?

We looked at a large house, 4 double beds.., it was really nice. However this brings me to point 1.. the school catchment area and the school quality was dire.. that and it costing quite a large amount each month..
step forward a year.. in that year the council taxes have raised 200.. due to flooding ... the mrs was made redundant .. so all this would have been disastrous.. instead we chose a smaller 3 bed property in a great catchment area (this can change over time) but has the added advantage with our LTV. that we can afford it comfortably with one persons salary..

So buy.. but realise it will get better over time. You will need to make adult hard choices.. hence work together on plan (1) and (2)...

Lastly .. if one of you is putting in 90% of the money think - what if the relationship doesn't work? That's one thing you want to get sorted..
 
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