Buy at the top of budget or buy cheaper knowing you will need to move in five years or less

[newbuildy]

Interested to see what would be your choice, and why

We could max out on our mortgage in principle and this would allow us to buy a 3 bed semi detached home. The idea that we might never need to move or certainly not for a long time is quite comforting, but we’re balking at the estimated monthly repayments with current rates and it would be 30% of our take home which is quite steep

The alternative to this is to buy a 1 or 2 bed apartment or 2 up 2 down terraced house. This would keep repayments low but we’d almost definitely have to move in 5 years or less from purchasing it. Moving costs are expensive and if we were in negative equity and stuck in a small home I imagine it would be stressful

Secure dual income and do have the option to take a 35 year term (though even with this it’s still a very high monthly outgoing). I know it’s the toss of a coin but which move would you be happier with, and why?

To avoid a drip feed, our income together will go up slowly over the next 5 years as DH is junior and has room for promotion and commission comes along with his role.

Buy at top but make sure you’ve budgeted carefully!

What's your family situation? Do you have DC? what ages? Do you want any more?

We needed to make this choice and we’re going for a 3-bed semi so we don’t have to deal with simultaneously buying and selling, estate agents fees, stamp duty etc.

However for us this is a 28-year mortgage and less of our take-home with lots of ability to overpay. You sound like you might be over stretching yourselves a bit.

Buy the best you can but ensure you stress test well.

If you'll need to move earlier, you'll end up paying more in moving and legal costs, maybe early redemption fee on a fixed mortgage too.

To avoid the potential early redemption fee if you go for the smaller starter home make sure your mortgage can be ported

If you move twice in a reasonably short space of time you'll also have two lots of stamp duty to pay, that you won't get back from anywhere.

I'd go for the most comfortable place I could at this stage, but not maximising mortgage payments.

No DC as yet planning to try within the next year - when we’ve bought a house, pretty much. I know childcare is extortionate and pay is also reduced on maternity leave.

Buy a small house with the potential to extend.

Normally the advice is go as high as you can because prices keep going up but currently I wouldn't stretch too far. We had this choice and went cheaper because we wanted options as young kids are stressful enough without worrying about money too. As it happens childcare is over a grand a month per child and had gone up hundreds per month per child this year alone. I think I needed about £600 spare in the budget to account for all the rises and it was a sensible budget to start. It's not worth the stress and worry.

Buy the biggest you can without stretching yourself to the max! No one knows what will happen in months to come. You should try and have some flexibility in your budget.

That could include being willing to take on second jobs and/or take in a lodger if you do go to the max.

I don’t like to offer too much advice but here’s what we did with some suggestions included in case you do go for the maxing out option.

We bought at our max ish 2/3 years before DC arrived and got a family home we won’t need to move from.

Pros - only one lot of stamp duty/moving costs plus no need to move with a baby. (I know people do but I couldn’t imagine anything worse at the mo - my dd is six months).

Make sure you factor in nursery fees and paying mortgage on 1.5 salaries.

We are in London so my stamp duty point may make less financial sense out of London if properties are cheaper.

We were late 20s when we maxed out so we were also comfortable my DH salary should increase really between then and retirement enabling the monthly payments to become easier to manage at some point. If you think scope for future promotions I think maxing is ok as payments should theoretically get easier, but if your salary is going to stagnate you may not want to be that stretched for ever.

Also we fixed recently 5 years for peace of mind. My dd will be in primary when we have to remortgage again so fairly relaxed about that.

The only thing I’d add is do you know what you want your family home to include pre DC’s arriving? We were fairly comfortable (ie in a good catchment area for schools etc, but maybe worth thinking through)

Hope this helps!

PS our mortgage is 25% of take home pay. But as above I’d hope that goes down if dh gets a promotion at some point in the future.

I'd probably go for the larger house and have a lodger until you have children. Hopefully you can also overpay or make savings for future childcare that way.

Thank you, really helpful. Sounds like that was the right choice for you. Definitely factoring schools into areas we are looking at. I know they can change but we are considering the family friendliness of the area for sure

Could you buy the 3 bed semi but get one that requires some work? That way you might get a home you can settle in for many years at a lower price. You can do it up exactly as you wish during a period of increasing income before you start a family.