House move - stretch the budget or hold back..?

[Heelheelballball]

We were talking about moving before Covid arrived, planning to move this year or the beginning of next. More space would be nice but the real reason is schools. Applications and catchments, but also to improve the logistics of school runs which are v tricky where we are.

Anyway, we are lucky enough to be able to upsize fairly significantly from where we are. I'm trying to decide how to settle on a budget/house. The two extremes of the range of options are:

1/ Stretch the budget to the max, take on a substantially increased mortgage, leave ourselves with minimal savings. Jobs are secure I think, but I'm aware plenty of people are proven wrong... We could afford the repayments, but would have to carefully save/budget for bigger expenditures like holidays etc. But we'd get the kind of house we could only dream of a few years ago and could see ourselves staying in for the long term.

Or, 2/ Reign it in significantly, only increase our house value as much as necessary (we'd have to increase a bit to move to the area/s we'd like). Do the house up if it needed to hopefully add value. Save money. Move again in years to come if we are still able/want to.

Obviously there is a middle ground to be had, but it would take the full budget to get our "forever" (hate that term!) house...

It just seems so risky to go all in at this point with the world so uncertain and crazy! But when you look at the costs (stamp duty!! 😱) it maybe seems crazy to almost plan to fork out twice in a maybe 5 year (?) period. Ideally I'd wait and save for a few years and be in a better position to move once but the schools issue has imposed a firm time frame.

I know, these are nice problems to have, I'm eye-rolling myself a bit. If you'd have told me five years ago I would be debating how much money to spend/savings to retain I'd have laughed in your face.

What would you do?

I think it depends so much on your circumstances. I.e. are you in jobs which may lead to promotions, how likely is that and how much will your income increase by?

Equally, do you currently pay out childcare/student loans which will stop at some point?

What is your monthly expenditure like- could you cut down on gym membership, phones and holiday spend if it came to it?

If yes to those (or other similar questions), then I'd stretch. Otherwise I'd much more nervous.

The trouble with getting advice from people who've bought before is that many of the 40+ people coming on with advice were lucky enough to buy at the right time to experience a long period of lowish interest rates and house price growth. That's a historical anomaly, and isn't about them being especially canny investors, but fortunate ones who happened to reach adulthood at the right moment.

Interest rates are likely to stay low for a while and mortgage protection should include redundancy cover for a short period, but agree that the wider economy looks challenged and noone knows the outlook. I'd go midway too.

We moved house in May into what I would call our dream house. I never thought I'd live in a house like this. We ended up stretching the budget for it.

Since moving, almost every day, I've thought to myself that we made the right decision. We have so much more space, no redecoration is required, and it suits our needs perfectly! We love living here.

I'm a SAHM expecting another baby in September and my husband works in finance which is always quite turbulent with changes but we have some savings and he's well connected within his network and with recruitment consultants. He was previously made redundant in 2016 and learnt how important networking is in his field then and has worked to maintain it.

Is it worth having a conversation with your husband re what would happen if the worst happened?

I absolutely would not move at the moment, and I'm a huge risk taker normally!

Think we're in a little bubble at the moment, but come January, I think it's going to be hell.

Give it a few months and if the housing market is still stable then look around then.

I can't believe that anyone is buying a house at the moment. Never wanted to be wrong so much in all my life!!

I'd play it safe tbh.
See how things pan out over the next few months and then you'll have a clearer idea of things.
DH took very early retirement last year so we sold up and bought our current house outright. We had seen another house which I fell in love with but it would have took all our savings to buy outright. We settled for the one we have now as we still have cash to do whatever upgrades we need, plus fund dd at uni, afford nice holidays, etc.

@TartanTuesday surely people who are buying now and fixing their mortgages for 5 years are safer than those in an unregulated rental or those who will be coming to the end of their fixes in the near distant future?

The risk is negative equity, but every owner with a mortgage is at risk of that.

Not all jobs are at risk, I'm in a statutory role that can't be dissolved and DH is in the military (if they got rid of him it'll cost them a fortune and wouldn't plunge us into financial insecurity for a long time)

Houses are flying off the shelves right now, I imagine similarly to us others know a downturn is coming and if we need to hunker down for a while better to do it now and get into a comfortable long term home.

It could be really difficult to find a house and a mortgage when the downturn is in full swing, vs now.

So while I agree with others I wouldn't be borrowing to the max (we actually changed locations to get the house we wanted at a cost that didn't scare us) I absolutely would, and am, move.

I bought exactly a year ago, an significant stretched myself to do it. I did so for the reasons you are considering it too - stamp duty x2 and moving costs x2 seemed silly and this place was somewhere I could live for a very long time and be happy.

However it hasn’t been easy. I’ve been helped by falling interest rates which have lowered my mortgage payment, but even then, it has been a stretch. I am in a very secure job, but my expected raise for this year hasn’t come through (due to Covid).

I have found myself worrying about money more this year than I ever have, and I don’t enjoy the feeling. However I am making sure I am doing my best to build up a cushion of savings and in the mortgage, just in case.

The decision to do this was made well before Covid for me, but helped by the fact that interest rates were going down at the time and looked likely to stay down, I expected to get a pay rise each year, so wouldn’t feel stretched forever, just maybe 1-5 years. I bought in a holiday destination, and enjoy staycations, so not having an away holiday for up to 5 years doesn’t bother me, my family all live close by, so no need to visit/holiday there. The house was also quite new, with no work/expense required.

Even with this, the hot water broke in my first week and my washing machine in the second week - so my savings went quick smart!

Overall, 1 year into this I am glad I stretched. However I strongly recommend keeping an emergency fund for those inevitable things that will happen, and also budgeting immediately to increase savings and/or pay off more of the Mortgage to try and get out or reduce the ‘stretch period’ ASAP.

@notheragain4 Yes completely understand what you're saying, and agree to a certain extent.

However I remember how awful it was in the 80's, huge unemployment, massive queues at the dole office, houses repossessed. It was a terrible time, especially if you didn't live in the south of England.

If I was renting at the moment, I'd sit tight and wait a few months to see if house prices are going to fall. OP may be able to buy a house within budget without the huge commute.

Like I said, this is so unlike me, I'm a huge risk taker normally. At the moment I'm a single parent with a huge 6 bedroomed house, in a beautiful area. I bought just before the market crashed in 2008. I was in negative equity for several years but didn't care as this is my forever house. I've had lodgers for the last 5 years to help pay for luxuries.

However as soon as the Covid lockdown happened I got another room rented out to a lodger, to start having savings and if interest rates go through the roof I will rent a third room out.

OMG this is a novel. Sorry. Maybe I just feel so anxious because I lived through the 80's and feel this is going to be much worse than that.

Last week I went to the very posh town near me, and felt a bit sick seeing all the empty and closed shops. The last thing I'd be doing in this current climate, would be buying an expensive house.

Agree if you can buy one cheaper than your rent, and doesn't stretch you, it's a risk worth taking because yes in the long run you will get your money back.

If I was renting at the moment, I'd sit tight and wait a few months to see if house prices are going to fall. OP may be able to buy a house within budget without the huge commute.

But what if the landlord has to sell up? What if they wait too long and the market has dried up and lending is really restricted? (Not sure if OP is renting or not)

I appreciate no one knows what will happen, it's unprecedented etc, plus Brexit, but that's the way of the world, no financial crash is the same so it's hard to compare. Nothing stays static. Who goes into a 25 year mortgage expecting stability over the whole period?

I agree I wouldn't be comfortable stretching to the limit and would be cautious, but for some people (and I count myself in that) now is the right time to buy. If we don't buy now we are going to be stuck in a tiny 3 bed for god knows how long. We can fix our mortgage for 5 years, I'm confident our jobs will ride this out. I guess my point is it's not a bad time for everyone. Times like these always has winners, losers, and coasters. Only OP can reflect on how secure she feels her position is I guess.

@EasilyDelighted

I wouldn't stretch in these uncertain times. I think unemployment is going to go through the roof next year.

I totally agree with this. We bought our first house 20 years ago, and then upgraded a bit 3 years later. We’ve never “stretched” and there have been many times I’ve been glad of this. Now being one of them!

We also had a major flaw on one house we bought - not picked up by survey but we didn't do full structural (always do full structural) and homeowners had positioned a sofa and full length curtains to conceal cracks and patched them externally. That cost us 30k to correct (main front support wall of house!!) Thank God we had some reserves.

DH would choose to stretch. I’d always choose to play it safe. In the last ten years I’ve experienced redundancy, developing a chronic illness, became disabled, and now we are in a pandemic and heading into a recession. Stuff happens!
If you can buy somewhere you could extend when finances allow that might be ideal :)

Thanks all 😊 To those who wondered, we own this house with approx 50% equity. We are mid 30s.

My natural cautious nature would have us "wait and see", but I agree that there is more certainty and stability in our little bubble now than there will likely be in six months time, (recession really hitting, widespread job loses, potential interest rate changes, no deal brexit throwing fuel to the fire, take your pick! 😩). And the crunch of the schools issue gets ever nearer, we can't wait forever, we'd have to make a completely different plan. There are various reasons why we want to stay in this vague area so don't want to completely relocate (as much as I can dream about the houses we could have elsewhere in the country on right move!).

I'd say we are fairly secure, DH can still expect a modest but definite annual payrise and is well connected in his industry. I'm a bit less of a catch for employers (😄🤷‍♀️) but there is definitely room for improvement and a route to get there. We're not big spenders, biggest non-essential outgoings are children's clubs etc... So, I think I can convince myself that moving itself is doable. But I think I know really that we need to hold back, keep the mortgage down enough that we are not watching every penny, and retain more than bare minimum savings. I couldn't be living with the worry that something which would be simple to fix now, like a broken washing machine/car, would wipe out any savings/cause us to struggle.

Thanks again all, it's nice to hear different angles on this 😊

I think that’s the right choice, good luck with it all!

I think if you are buying for school catchment then buy a ‘for now house’ for school catchment, and try and come under your budget. You can continue to save, and enjoy the school years with your kids- dinners out, holidays etc. And you will be able to sell on and put towards your dream home when the time comes.

The only house I would stretch myself on is my ‘forever house’ (or if you don’t like that phrase my DH cheerfully coined the phrase ‘the house we will die in’!)

I'd stretch for a long term house because once you've paid 5-7% of the house's value on moving costs (stamp duty bites hard, estate agents minimum 1% +VAT for anyone competent) you've saved a fair bit. A 5 year fix, especially if you have a solid deposit (50% equity should be a decent chunk if you can keep the LTV under 70% that helps on the mortgage deal)

We're currently in rented having relocated a long way, our plan is to wait for a likely forever home to come up, maybe get less fussy once Brexit, Covid winter etc have happened so the market works itself out.

I'm less worried about a value loss/negative equity in a long term location and long term house.

My worst nightmare would be being stuck long term in a house that was just too small for our needs!

Your DH sounds blunt but to the point FreeKitties, I like that 😄