How far do you push yourself when you buy property?

[Participant]

I'm in the position where I want to move my family into a bigger house with land, but to get the house we want, i.e. significantly better than our current house, would mean stretching the monthly budget.

I'm aware that there are a million different variables to this question, but as a general principle I was wondering if people subscribed to this view of stretching yourself to the limit for your main home, with the expectation that affordability will (should) become easier in the future with payrises at least of inflation (hopefully), but with the mortgage bill staying flat (the debt is not indexed).

We're comfortable at the moment so would be sacrificing disposable income, but in exchange for a bigger house with some land in a slightly 'posher' area. We'd never need to move again.

I guess this goes against a fundamental principle of finance, being to avoid owing other people money as much as possible!

 

[bloodiedathame]

Funny you should mention this, a house came up for sale near us which we wanted. We needed to raise 100k to buy it, meaning borrowing more from the bank, bridging loans from family etc. It would have put our monthly expenditure up by a minimum of £250, that's just mortgage, then there's bills, paying back the bridging loans when inheritance comes in etc etc. I decided against it in the end, the money in equals the money out at the moment, there's nothing we can or want to cut back on. My wife should start earning from her business soon but it won't be enough to cover the difference. We're kinda hoping Brexit hits prices by 10%, it'd save us 30k and makes things possible.

 

[Rroff]

We'd never need to move again.

Don't be surprised if that changes down the line hah.

Only you really know where to draw the line but home should be, within real world affordability, be somewhere you are happy in so if you can make the budget work and see somewhere that feels right then personally I'd say go for it.

Personally I'm of the opinion a house is one of the areas that is a bit of an exception to the rule when it comes to money aslong as you are realistically going to pay it off within enough time to enjoy life once it is paid for and/or have enough disposable income to do that meanwhile.

 

[Semple]

I guess it ultimately depends on how much of that disposable income is being taken away. If your household income is 3k and mortgage is 1k and all other expenses are another 1k, then that's a reasonable amount to put onto the mortgage.

The only thing I would say is don't set yourself up to be caught out short. I.e. Expensive car repair, new boiler those kinds of things.

Have you looked at what you've spent on luxuries over perhaps the last 3 years. If you've had 2 holidays, bring it down to 1. Have you looked at your food shopping to see if that could be squeezed.

Ultimately only you and your family will know how much you can stretch your finances, just be wary of things popping up and still being able to cover them.

 

[Royal Fleet]

We are in the position where we could afford a bigger home. Since we moved in here 13 years ago our combined income has pretty much doubled whilst outgoing on child care etc have gone down.

We have taken the decision not to move. Rather we have extended where we are as we love the immediate area. If we had moved I reckon the moving costs alone would have swallowed up half the money we have spent on improving the house and we would have needed to find an additional £150k on top of that to be able just to get an extra bedroom. Instead we just have great holidays and more importantly don't spend each month worrying about the money.

My rationale
- my eldest is 14. In 4 years he will go to Uni, my youngest is 12 and will probably follow. After that this house will be plenty big enough for the two of us.
- We have extended the downstairs which is where you need the space.
- We have a Premier Inn 10 mins walk down the road. For the times we need an extra room we can book guests into there at our expense. At £100 per night we can afford a guest for 5 years living in the Premier Inn before the additional bedroom would be cheaper!!

YMMV though.

 

[Buffman]

I'm aware that there are a million different variables to this question, but as a general principle I was wondering if people subscribed to this view of stretching yourself to the limit for your main home, with the expectation that affordability will (should) become easier in the future with payrises at least of inflation (hopefully), but with the mortgage bill staying flat (the debt is not indexed).
!

I guess the obvious risk is the debt might go up due to higher interest.

I bought my current house as a 3 bed and there's only 2 of us, will look to get something bigger (3 or 4 bed with 2 reception rooms) prior to having kids. This would be at 4.5x combined income, but I don't have any other high outgoings.

Means it will probably be a large mortgage but won't need to move

 

[GinG]

Have you any outgoings you could cut?

When we moved into this house it meant increasing our mortgage by around £300 a month.

After looking at outgoings we pretty much managed to get into the house increasing outgoings by around £50-£100

We got rid of sky for a start which was a good chunk, shopped around for utilities etc andajust cut the amount we were putting away in savings.

4 years down the line and don't regret moving one bit.

All depends on how much you would be squeezing yourself for, it's all good saving money for the future but you just don't know what will happen tomorrow. If it means you and your family will have a better family life day to day I think that means so much more than seeing some extra 00's in the bank doing nothing.

 

[Psycho Sonny]

We are in the position where we could afford a bigger home. Since we moved in here 13 years ago our combined income has pretty much doubled whilst outgoing on child care etc have gone down.

We have taken the decision not to move. Rather we have extended where we are as we love the immediate area. If we had moved I reckon the moving costs alone would have swallowed up half the money we have spent on improving the house and we would have needed to find an additional £150k on top of that to be able just to get an extra bedroom. Instead we just have great holidays and more importantly don't spend each month worrying about the money.

My rationale
- my eldest is 14. In 4 years he will go to Uni, my youngest is 12 and will probably follow. After that this house will be plenty big enough for the two of us.
- We have extended the downstairs which is where you need the space.
- We have a Premier Inn 10 mins walk down the road. For the times we need an extra room we can book guests into there at our expense. At £100 per night we can afford a guest for 5 years living in the Premier Inn before the additional bedroom would be cheaper!!

YMMV though.

premier inn lulz.

by adding a bedroom you are adding value to your home though. whereas premier inn literally is wasted money.

 

[a1ex2001]

I wouldn't do it, stay where you are pay off your mortgage and enjoy life think of all the extra experiences your family could enjoy with all that money!

 

[Shoza]

Try and keep your mortgage under 35% of your monthly outgoings.

 

[BigDannyO]

We're comfortable at the moment so would be sacrificing disposable income, but in exchange for a bigger house with some land in a slightly 'posher' area. We'd never need to move again.

This is exactly what we did last year. Moved from a small Victorian terraced house with no offroad parking, a tiny courtyard at the rear, no garden at the front, a nightmare to commute from, albeit in a fairly nice area. Moved into a 20 year old detached house with garage, big driveway, nice big garden, conservatory, more than one toilet (essential with kids!) a slightly 'posher' area and a much better commute.

We were financially comfortable in our old home, but the house was too small and too cold with our two young kids (4 and 1 at the time of moving). Even with the benefit of 10 years worth of equity in the old house our monthly disposable income is seriously reduced. But this is more than worth it considering the significant quality of life improvement we've all felt.

 

[MG42Maniac]

My partner and I recently bought our first house together last summer. We bought quite late, I was 30, she was 25. We looked at a bunch of different houses for varying budgets but decided to push it near the limit, in terms of borrowing. We ended up buying a 4 bed detached for £440,000. We don't regret it for a minute. We have friends who have bought 2 bed houses and already talk about "the next house". If we go round their houses, there is never enough seating and parking is normally a pain. It means that our monthly disposable income is down vs a cheaper house, it's mainly the higher council tax and mortgage payment. It's not really down that much and I don't think it really changes our life. What it does mean however is that we get to enjoy living in a big house and don't have to put up with the issues that are associated with terrace/semi detached houses. I think it depends on the impact the extra payments would have and what the new house would give you, day to day.

 

[Psycho Sonny]

Try and keep your mortgage under 35% of your monthly outgoings.

not realistic at all. also what do you consider to be monthly outgoings?

some people will sacrifice stuff to be in a nicer house. plus homes are so expensive they can easily be 50% of your monthly outgoings.

 

[Psycho Sonny]

My partner and I recently bought our first house together last summer. We bought quite late, I was 30, she was 25. We looked at a bunch of different houses for varying budgets but decided to push it near the limit, in terms of borrowing. We ended up buying a 4 bed detached for £440,000. We don't regret it for a minute. We have friends who have bought 2 bed houses and already talk about "the next house". If we go round their houses, there is never enough seating and parking is normally a pain. It means that our monthly disposable income is down vs a cheaper house, it's mainly the higher council tax and mortgage payment. It's not really down that much and I don't think it really changes our life. What it does mean however is that we get to enjoy living in a big house and don't have to put up with the issues that are associated with terrace/semi detached houses. I think it depends on the impact the extra payments would have and what the new house would give you, day to day.

you don't live in the real world 30 isn't considered late but "normal" and 25 is a pipe dream. especially when considering you went for a £440K property.

the average person will now buy in their 30's and their first home will be circa £150K.

 

[Jez]

the average person will now buy in their 30's and their first home will be circa £150K.

I think this is very much area dependent, I am miles outside of London in Oxfordshire, yet you still wouldn't find a property for just £150k anywhere, not even small ex council stuff!

 

[BigT]

When I was younger I always stretched as far as I could. I figured that wage increases and house price inflation would mean a little pain for a few years with less disposable income would reap rewards in the future. And it did by and large. Doing the same trading up every five years or so a few times saw us in a house now there would be no way I could afford if I was starting out from scratch. I've probably lost 6 years out of 20+ as a homeowner whereby reigning in spending meant cutting back on some nice things.

Now however we've reached where we want so as disposable income increases a little we pay the mortgage off faster so hopefully there'll be plenty of time and money to catch up on those things I missed out on for a few years up until now. That's not for everyone though and many would prefer to have the experiences earlier on in life.

I do feel for people starting out now. When I did in the 90s it was an awful lot easier to get money and house prices were far more affordable in the South East. I remember the bank suggesting I took a 105% loan in order to cover the costs of moving and conveyancing as well. This was straight out of Uni with nothing but a decent graduate placement for work and a load of student debt. That just can't happen today.

 

[MG42Maniac]

you don't live in the real world 30 isn't considered late but "normal" and 25 is a pipe dream. especially when considering you went for a £440K property.

the average person will now buy in their 30's and their first home will be circa £150K.

For me, when compared to friends of the same age, my partner and I bought late. Though they all bought smaller houses when they were younger as quite a few of them met their wife when they were in their early 20s. I don't regret waiting till we could get a decent house but I'd personally be dissapointed if I waited till I was 30 and could only get a house for circa £150K.

 

[flea.rider]

well I wouldn't .. because we did .. on our 3rd house move we went up and past our limit it was fine for 2 yrs .. then the downturn hit and with cc loans and mortgage we had to sell it yeah made a slight profit ..
but we have never really recovered ..

 

[Psycho Sonny]

I think this is very much area dependent, I am miles outside of London in Oxfordshire, yet you still wouldn't find a property for just £150k anywhere, not even small ex council stuff!

it could get you a 3 bed semi-detached house in a semi decent area in glasgow.

however if you wanted a 3 bed terraced house in the west end it would be £400K.

so obviously area dependent even within the same city. i could show you a house for £1.5 million then another around the corner for £120K in glasgow.

For me, when compared to friends of the same age, my partner and I bought late. Though they all bought smaller houses when they were younger as quite a few of them met their wife when they were in their early 20s. I don't regret waiting till we could get a decent house but I'd personally be dissapointed if I waited till I was 30 and could only get a house for circa £150K.

like i said you love in a bubble if that is your thinking. the average wage in the UK is £25K which is being exaggerated due to high earners. the average median wage is like £22K.

on £22K the max you could borrow as a single person is circa £90K so put 2 people earning £22K together it's £180K which gets you to the £150K figure.

 

[The_Abyss]

But that's probably too simple a way of looking at it. Given that nearly 40% of households are in rented accommodation, and the fact that it isn't unreasonable to expect that a number of those will be at the median wage or lower, higher average salaries will be more likely to be homeowners and more likely to be purchasing properties above that value.