would you buy a house if your mortgage would be double your rent?

[anothernotherone]

I know this scenario would be rare in the UK, but:

Rent is below current market rate, because the landlord prefers secure reliable long term tenants who always pay on time and never bother him - we've been in the property 12 years and he's never raised the rent.

Tenancy is as secure as you could reasonably hope for - 6 months notice period, and rent could only be raised at a fixed percent per year if he decides to raise it.

The house is a bit quirky and run down but big enough - kids all have their own rooms, though there's only one bathroom. Location was nice with preschoolers but not great for teens, due to lack of facilities and public transport.

We didn't think we could afford to buy in this area at all, but have been approved for a scheme reserved for locals. House would be brand new and 5 miles away on the edge of a small town walking distance to schools, shops, sports facilities, library, and a train station with trains to the city - better location for teens.

However the mortgage will be double our rent, and the scheme ties us into living there for 15 years! This is the only way we will ever be able to buy a house of compatible size to the one we rent within this area.

We have confirmed that we can borrow enough but we'll be quite stretched. We currently save about 1/5 of our after tax earnings and won't be able to save much at all paying this mortgage.

Is it worth it to own and live in a better (as in more convenient, both are equally safe etc and feed the same schools) area?

We aren't young either - in our 40s. We'd be tied to the mortgaged house til the youngest child is 23, by which point we might not need such a big house unless we have 3 adult offspring still living with us ..

Wwyd?

Bluntness100 yes 14, 12, 8. 14 year old might want to move out in 4 years, we might be rattling around a too large house in ten years... Or they might all still be living with us... It's commutable to a university city where nobody can afford student accommodation and most students live with parents... But they might not go to university, I'm no longer convinced that's always a sensible path unless you're very sure about where it's leading...

If they all move out we might want to move to another country altogether - we'd be free to be mobile and have very healthy savings in ten or twelve years if our rent didn't go up and the kids had all chosen to move out, we could go anywhere...

But of course the landlord might die/ sell in 2 or 5 years time instead I know. DH's grandmother lived in the same rented flat for 60 years though, renting long term is very normal here...

But you can sell at a profit and “go anywhere” in fifteen years . What’s so magical about being able to do it in twelve?

ImNotHappyaboutitPauline yes my income should increase as I'm in the middle of a professional qualification. DH's probably not much - he's well paid for what he does as it is and earns a lot more than me but has reached the top of the pay scale more or less. We only pa after schooly child care for the youngest, that will stop in 2.5 years time. We don't pay for holiday cover as we can juggle. Childcare isn't a major outgoing.

Thanks for the opinions. We keep swinging between thinking it's crazy to do it and thinking it's crazy not to. It's such a huge amount of money... We didn't expect to get the chance to do it - we applied for the scheme over a year ago and heard nothing and had almost forgotten about it. Now we have a plot reserved and about 6 weeks to decide...

It's scary taking on an investment like that, but Id do it, you'd soon cut your cloth to suit your finances, I think you'd regret not doing it, let us know what you decide , good luck!

I really don’t see the dilemma, you would be crazy not to buy.

Essentially our housing costs now are 20% of our after tax household income, and the mortgage would be 40% after tax (though still within the recommended limit of 28% of gross income - just). It's a lot of money, and a long time to be tied in to paying it for. If one of us lost our job we'd be in a lot of trouble and not able to be mobile.

If you lose your current rental you’ll be in exactly the same sort of trouble . You don’t currently have any sort of guarantee that renting significantly below market value will continue

I don't think I would buy. I've seen so many couples move to big houses then literally in a couple of years, all their kids have moved out and it's just 2 people rattling about in a house that is too big for them. Some houses I see as a ball and chain!

If you have plenty of savings...If worst came to the worst and your landlord sells..You can reconsider then.

Personally I wouldn't do it. Just because, as you say you're in your 40's...so a 25 year term is long. What if one of you can't work anymore? Could you continue to pay the mortgage?
I'd rent until you get kicked out. Keep saving and with the 6 month notice period you have you should be able to find somewhere

another

You really need to bear in mind that most posters are from the UK. It’s a completely different way of life in Bavaria than in the UK. You need to remember that they’re coming from a POV where It’s very rare to live in a long term rental. I’d be much more inclined towards ‘do it’ if renting was as unstable there, as here, but it’s not! Plus, a decision that might be a ‘no brainer’ In your 30’s with young children, isn’t a ‘no brainer’ in your 40’s when your children are much older.

Do you think your landlord would be honest about his plan for the next 10 years if you asked him?

To ME, the issue isn’t the money (you’ll be fine, your usual savings will just be tied into the property for 15 years and not useable until then, but you’ll still have them iyswim). The issue for ME would be being tied into LIVING in the house for 15 years. FIFTEEN years you’re committed to LIVING where someone else dictates or losing all your money.

I TOTALLY get why they have done that and I think it’s the right thing for them to do for local housing.

I’m in my 40’s. I’m looking forwards to where I want to go, what I want to do...I might be here another 15 years, but I’m buggered if anyone else is going to make that decision for me.

Don’t worry about the mortgage, don’t worry about the house bring too big, just talk to DH and decide if you want to live in that area for the next fifteen years. It’s a big tie at a time you’re getting your life back from raising kids.

You won't have your savings in the bank but you are still effectively saving, it will just be tied up in a house.You will have a major asset you can sell after 15 years.
If you don't buy when you retire you'll use those cash savings to continue paying rent - which you won't need if you buy.

It's a no brainer. The only thing that would stop me would be if I thought I wouldn't be prepared to live in that area for that long.

IncrediblySadToo you're completely right, about all of that. Obviously I won't take the MN majority advice as gospel, more just helping me think it through.

I have always been quite mobile, lived in four countries, the "forever house" idea doesn't resonate with me at all, and we qualify for this scheme due to having lived locally for so long and having children born here, but DH and I are not local, though he is German and I don't have any town or area elsewhere I think of as "home" particularly. I like being potentially free to move whether it be for work or in semi retirement (not that keen on ever fully retiring).

On the other hand grown up children around here do stay living with parents into their mid 20s as often as not, and I wouldn't want to uproot the kids (the new location doesn't involve changing schools).

DH's father is widowed and living in a 4 bedroom house has made noises about us buying DH's sibling out of his potential inheritance and giving DH his early - this means his house, there's nothing else. DH is quite keen on this and it would be cheaper even factoring in renting fil a one bed flat in his preferred location, which is his idea, but I am so not keen - it would mean all the kids moving school, and the house is in an even less convenient location than the one we rent. It's a nice house in a nice, as in quiet and safe, location but absolutely miles from anywhere with no public transport. It'sjust not where I want to live really, but it would be DH's first choice because it's stability for far less money and no tie in (although morally there is a tie in while fil is alive IMO).

It's just not a straight forward decision and we seem to make bad decisions about long term things like this, despite always bobbing along okay in the end...

As a pp said it's much more normal to rent long term in Germany so UK perspectives might skew things.
But I pay nearly 3x as much for my mortgage as I did for my rented property.
Partly as I wanted the mortgage over a fairly short term to save interest.
Partly as my house is a good bit bigger than the one I was renting.

It's weird not being able to save as much but nice to think I hopefully won't have the expense of housing when I retire.