Prioritise lower mortgage or better house?(28 Posts)
My partner and I are 26 and 27, looking to buy our first home. We are lucky to have a very healthy deposit (because of inheritances on both sides), and could afford a flat now with a small or no mortgage. This would be my instinct - we currently rent a one bedroom flat and I am very happy with the amount of space we have.
He thinks we should borrow what we can to get the best possible house we can afford so we won't have to move if we have kids in the future because we'll already have space for them and a garden, and we would have plenty of time to pay it back. I'm open to this in theory but I don't know what the more sensible course of action is.
What would you prioritise - not having as much mortgage debt, or having a better house?
We bought a house recently and I thought a lot about whether to buy a two or three bed. We decided on a three-bed (that needs work), because of the uncertain economic outlook. It's hard to say how the next few years will play out, but if there is a slump in the property market and if inflation forces a rise in interest rates, we were worried we might find ourselves needing a bigger property but the first purchase might have decreased in value. Similarly, we were worried we could end up paying much higher interest rates when taking out a bigger mortgage later down the line. So we decided to buy a home that we could, if there is a downturn, live in for decades if we have to.
House prices are already stagnating, according to the latest data, and interest rates are at record lows, so I'd say it makes more sense to buy the bigger house now. But it depends on if you can afford it now, and if you want an investment (ie willing to take on risk) or a home.
Is somewhere in between a compromise? If possible I'd go as large as is comfortable so you hopefully don't have to move again for a long time as that's so costly in itself.
Good luck whatever you decide
It's difficult to know what the future will bring. We bought our first house thinking it had plenty of room for children and the potential to extend further in the future. We thought we'd be staying 10+ years but we ended up really disliking the location (cul de sac with a lot of footballs flying around near cars) so we sold and moved when our mortgage fixed term ended.
Also worth considering the fact that flats can be hard to sell, our friends ended up renting theirs out as no buyers.
Buy a house you can extend or go up into the attic if needs must. Also it's easier to throw cash at a house pre kids but post kids life becomes much more expensive to live.
At your age, bigger house. You will gain a lot of equity on that over many years and it will stand uou in good stead to move up the housing ladder in the future if you decide to.
Think about how much you want to work post kids.
So often I see people who have gone rights up to their limits with the mortgage then when they have kids they both have to go back to work full time in order to pay the mortgage.
If you go for the smaller mortgage it gives you more freedom and flexibility.
We went for the flat. Town centre so it should be easily sellable if the time comes but we have so much more disposable income. I wouldn't want to tie everything up in a house for 20+ years when you don't have to.
House, for the long term you are young and eventually the mortgage will seem small. Moving is expensive, so a house now for the long term will save thousands.
I would go for the house tbh, as long as you're happy with the repayments (and taking into account that your income might well drop when you have kids if one of you goes part time or gives up work). The stress and expense of buying/selling property is just not worth doing more than you have to!
We had a similar quandary and opted for the larger house, albeit on the agreement that we took out a longer term mortgage fix (for security, particularly important as we were buying a newbuild) & that we hammered the mortgage via overpayments whilst we were child-free.
Thanks everyone - I think you're right and we should go for something we'll want to stay in long term (hadn't actually thought about the costs of moving within a few years). Now to find the place!
Bigger house everytime. I literally was in your position 10 yrs ago. DH and I bought a small house (2 bed with small lounge diner and galley kitchen).
It was perfect for the first 2 yrs...then I fell pregnant and we got the baby stuff in and realised how little space there was. So we put our house on the market...except all of a sudden the recession hit and our property lost approx £50k (new build so we'd paid through the teeth for it anyway).
8 years we were stuck there...8 long years. Yes the house was nice but boy oh boy it was small and during those 8 yrs not only was baby no 1 born but also baby no 2 and nearly baby no 3! You can only imagine how little space we had by then!
It took 8 yrs for prices to recover so that we sold and broke even.
So many times I kicked myself for not thinking of the future when we bought. I always say to people now that they should consider the property for at least the next 10 yrs and if it won't suit where you hope your life ends up then don't do it
I don't mortgage up and go for something you'll be happy in for a long time.
As long a stay you both have decent and relatively secure jobs.
If you are both like jobbing actors or something I'd buy a flat outright!
I bought a very small property and was negative equity - this was tough when we had two under two (2 highchairs etc)
At your age, you can afford to buy a house with a mortgage that won't restrict your lifestyle because of a hefty deposit by the sounds of things.
Given your ages and situation, I would say get a better house that can fit 2 kids, with a decent primary school catchment. He is right in that then you don't have to move until much later. If you buy a 2 bed flat you will be too small once a child is here. You can of course raise a kid in a small flat and plenty do. But there isn't a reason to do it if you can afford it.
I know two who did the same as you planned and got new build 2 bed flats. One had to move very soon after their first child. The other (a guy) met someone with two kids and he rented his flat out and had to rent a bigger house because they can't all fit into his flat.
If you both have stable work then the most economically sensible thing to do is move as few times as possible during your life. That is because each time you move house you pay stamp duty, fees, costs etc which are all a complete waste.
Therefore buy somewhere you will grow into. Don't overstretch - but generally a 60% loan to value is conservative and will get you excellent rates of interest. Mortgage rates are exceptionally low at the moment so now is a good time to borrow.
Again, this is all premised on you both having stable income (or one of you if you are only looking to use one income to pay the mortgage). Probably best not to borrow more than 3 x salary if you don't want to feel any financial pressure.
You will quickly outgrow a 1 bed flat if you plan on building your lives together. If you're not that committed, and are just doing it as a temporary way to invest money, then be cautious about buying a house together at all, as the cost and acrimony is very difficult if you split up.
Bigger house, we moved a couple of years ago and went for a slightly smaller house and now we have to move again.
Worth bearing in mind that if you have too many bedrooms in the short term, you could always look to take on a lodger in the future if things got tricky financially (i.e. redundancy etc). Alternatively, if no financial issues on the horizon, extra lodger income would give you the opportunity to hammer the mortgage overpayments.
Under the Rent A Room scheme, that means up to £625pm of additional tax-free income.
You're both young so definitely go for the house. Personally, I wouldn't borrow more than 3 x your joint incomes unless you have jobs that have natural career/salary progression. Go for a house which you can add value to.
At your age, better house for sure. We know so many people (including us!) who were cautious with their first property and ended up moving as soon as the DCs came along, in incurring tens of thousands in costs associated with the move. Also, as other have said, overpay as much of the mortgage as you can when you are both working.
Join the discussion
Please login first.