Should you buy the most expensive house you can afford?

[Celia1978]

Interested in other people's opinions. Moving house in London. We are fortunate to have a decent budget - but we want a family home: 3+ beds, garden, school catchment etc so are priced out of many areas. After a bit of research I've decided on an area I like that ticks many boxes but DH isn't sure on the basis that the houses aren't expensive enough! His thought is you should get the biggest mortgage you can (within reason - we're not talking about going beyond a limit where we'd be confident of making repayments) because it gets you into a better position for your next move.
Just wondered what others thought. I quite like the idea of a small mortgage - but I can see his point too!

[PossumPoo]

Hmm, I definitely don't agree with your DH. The cheap area may increase in value and you'd have a cheap mortgage in an expensive area

Or is he being a snob and wanting to only live in an area where a certain salary is needed to buy?

[snowgirl1]

Could you afford the repayments on the more expensive house if interest rates went up significantly?

[80sMum]

No point in paying more than you need to. If you've found a house that suits you and it's under budget, that's good - isn't it?

[littlecrystal]

Me and my friends have not regretted stretching 5 years ago as it has translated into equity, bur in your situation I would rather buy what you like and, if budget allows, would look in buy to let properties.

[foxdongle]

I wouldn't, I would move to the area/house that we liked the most.

we could have afforded a much more expensive house and looked at a few, but this is the one we wanted and loved straight away and the area is great. our decision was 100% right for us.

more expensive does not necessarily = better

[prittstickinmyhair]

I agree with your DH. I don't agree with just going for the most expensive house you can afford for the sake of it, but as another Londoner, I would go for the more expensive area. I think the more expensive areas will rise in price by a bigger factor than the up-and-coming areas, so in time you'll build up more equity. We only bought a few years ago, but prices have jumped massively since then. If we'd gone for a cheaper area that we'd been considering, it would have increased in price as well but not by as much. And DH has had a couple of pay rises since then which means the mortgage is easily affordable even if interest rates rise (though we never overstretched ourselves in the first place).

It would be interesting to know which areas you're considering (because I'm nosy ) but also because it's easier to assess the potential gains in equity you might get when you're looking at specifics.

[morethanpotatoprints]

it would be madness.
Interest rates can go up drastically, house prices might not go up as much in comparison.
could get stuck in negative equity and your dh never get the next house he wants.

[Quinteszilla]

You never know with London. Our house more than tripled in value since we bought it 12 years ago. Then the area was a bit run down and boring. But it has rejuvenated, old people moved out/on/died, and young families have moved in and renovated their homes, blown life into front gardens, bought Volvos and Lexuses, (or is it Lexii in plural??) and the neighbourhood has changed.

[Pinkcustardpurplecustard]

Will a huge mortgage impact your life style? We've always had to be very careful money wise due to our big mortgage.

What about somewhere more affordable but extendable. Something you can build onto in 10 years.

[Pinkcustardpurplecustard]

Buy in an area that will increase firmly price wise. Needs to have the best secondary and primary school catchment you can find.

[dozily]

It also depends on how your financial.circumstances may change in future.

We stretched ourselves to the max to buy our house 7 years ago. Repayments were easily affordable so it felt like it made sense.

3 dc later I considered giving up work as it's been hard juggling work/school/nursery but financially I just can't afford to. If we'd bought in a cheaper area we'd have more options now.

[Pinkje]

I think in theory your DH is right; to climb the property ladder in as few steps as possible means you should stretch at each stage with usual proviso on affordability.

Depends on what your end goal/top of the ladder is I suppose.

You could always get the house you like and invest the extra cash in a 2nd property.

[daytoday]

Agree with DH sort of. It's not about biggest mortgage but get the best house you can afford. In London the gap between each jump on the ladder just gets bigger and bigger with time.

[Celia1978]

Hmm - seem to have started two threads with the same question. Sorry about that. But anyway, thank you all for very interesting responses - clearly no overall consensus either way.
I think personally I feel that the future is so unknowable in all sorts of ways - interest rates, our financial position, other costs that might crop up - that if you can get something you like AND keep your outgoings reasonable at the same time that's a winning situation.
But I do also see that - if everything goes your way - then stretching yourself can pay off. Possum, no, he's not a snob (well, not any more than me) but has absorbed the idea that the 'sensible' thing to do would be to stretch, to get a benefit later on.
If we did do that it's not really that our mortgage outgoings would increase from what they are now (well, not before interest rates rose anyway), just that if we bought a cheaper house they'd drop, which with one set of childcare costs already going out, with a potential second maternity leave and more childcare to add to that in hopefully the near future, seems like a good idea to me.
Prittstick, we currently live in a v small flat in Islington. Family houses (well, the kind we'd like to live in - see, told you I was a snob!) are beyond our reach in Stoke Newington, Hackney etc so we're looking further east - Walthamstow, Wanstead, Forest Gate (which is getting Crossrail in a few years). We could afford nice house with money over for renovations...

[LondonGirl83]

Try to get a place you can add value to. That's the best way to move up the housing ladder regardless of what happens to house prices. Also, getting a place you can extend means that if you can't move as soon as you are anticipating the house can grow with you a bit.

[Mitchy1nge]

I don't think so, not if it's mostly mortgaged, life and housing markets can be cruel and unpredictable

[AlternativeMoniker53]

My friend is currently struggling with this, having taken advice and bought the most expensive house they could afford five years ago. It is a beautiful house but in the period they've lived there they've put two children in private school and the fees have gone up where as the husband's wage has not gone up as expected. They're currently over stretched and he's nagging her to go back to work. It's causing friction and resentment, the marriage is in trouble. I'd recommend you don't get greedy, leave yourself a bit of wiggle room.

[JaneinReading]

We used every last penny including the children's savings. The house went up £1m. So I am on the side of stretch as far as you can particularly if you both work full time and are on upwards income curves.

Ah just read AltM's comment above... my advice is based on women working full time and risks being spread through having two salaries coming in.

[Creamycoolerwithcream]

We did it for our first three moves as were confident DH's salary would go up as he was just starting out on his career. The first two moves were very close together and definetely the maximum we could have spent. On our last move last summer we were tempted by a much bigger house and mortgage but decided we didn't actually need the house or want the big mortgage and were mindful of interest rate rises as on a very low tracker mortgage. We are in our mid 40's. I think it depends on time of life and realistic salary expectations.

[fussychica]

You live in London - you'll make a shed load whatever you do - it's more a case of how much.

[thesaurusgirl]

Another Londoner.

Go for the house you can afford easily.

Many people - I include myself in this - ridiculously underestimate the cost of maintaining property.

If you stretch yourself, it will be a long time before you have spare cash to fix things if they go wrong. I know someone who bought a £1.5m house six months ago who still has no curtains, and who has had no heating all winter because she can't afford £5k to replace the boiler. Space and status and potential equity will not keep you warm at night.

[PossumPoo]

Thesaurus that's actually quite sad. We bought just before I went off on mat leave so we took the loan out on two wages but budgeted for one paying it back. I am back at work now but I wouldn't have had the freedom to choose to go back if we had stretched ourselves. I'm also in London, but I personally think there is a massive bubble here so would buy wisely now...

[oscarwilde]

Another Londoner.

Go for the house you can afford with a full-time nanny to pay for. Decent childcare is crippling in London. My view would be to stretch as far as you can but that point has to allow for some savings every month otherwise the stress will kill you.

If you can buy a house that meets all your criteria / or change it to meet your criteria and you still have cash left over, buy a buy-to-let or invest in something else.

[Apatite1]

Go for the most expensive you can afford, after you've accounted for:

1. Is there potential to extend if for whatever reason you can't sell and your family grows
   

1. Is there enough in the pot left for major house repairs if needed eg new boiler, new white goods, gutters and roof
   

1. Will you be ok with your kids growing up there ie schools, road safety etc
   

1. Can you still pay for major costs down the line eg holidays, new car etc
   

If the answers are yes to the above, stretch yourself. We are buying some where that has no potential to extend and where we probably won't want to raise kids (but works for current jobs), so we are sticking with a small mortgage and plan to move up the ladder.