Buy home we can afford or borrow money for forever home

[PeachOP]

Hi everyone, I’m looking for some advice. My partner and I are currently renting, but we’re now looking to buy our first home.
We’ve worked hard to save a 10% deposit, and during that time, we’ve had one child and are now expecting another. Initially, we set a budget, but after viewing houses in that range, we feel they’re a bit small. While they’re much better than where we live now, I worry they won’t suit us as our children grow, meaning we’d need to move or extend in a few years.
If we stretch our budget, we could buy a forever home, but it would mean borrowing from my parents and paying them back within a year. This is achievable but would mean another year of tight finances, and I’m honestly tired of scraping by after years of saving.
Would you go for the bigger house and tough it out for another year, or buy the smaller house and plan to move in 5 years

What % is £100k? If the difference between the 2 houses is £100k, I’d go for the bigger one to avoid needing to move within the next few years, with all the moving costs, fees, stamp duty etc, and it’ll only be more expensive in a few years time. It doesn’t have to be a ‘forever’ home, but buying somewhere that your family is going to grow out of quickly feels like potentially a false economy.

Agree we need the actual figures - what is the cost of both houses and how much are your parents offering to lend you?

Without more detail I think I’d go with smaller more affordable house. My kids are 2.5 years apart and different sexes and at 6 and 4 they are still sharing a room (through choice). I reckon you could get a good 5-7 years out of a 2 bed house (longer if kids are same sex) and then reassess. If your parents are able to lend you some money now then presumably they will be then too, plus you won’t have childcare fees to worry about and will hopefully have built some equity.

Dont underestimate 1. being able to take all the mat leave you want, and 2. being able to afford all the little things that make life with 2 small kids easier - day trips, going out for coffee, a holiday etc.

I'd go bigger. Only one lot of stamp duty, fees etc.

If your parents are giving you a gift and don't want repayment I would open a savings account and put money in that over the next few years - less when you're paying for nursery / on mat leave, more when that's over. Then give them a lump sum without over stretching yourselves.

Op, are you and partner going to Mary? Whose putting in more or less I wouldn't do anything without marriage unless you are both equally well off

£100k it’s bugger all at the beginning of your house buying journey definitely definitely go for the bigger house spread over 25 years. It will make very little difference in the grand scheme of things but it will mean that you don’t need to move twice with all the upheaval and expense that comes with it.

I was going to say go for affordable one but actually if your parents are gifting you the money and don't expect repayment you just want to repay. I would defer paying them back a year to take your full maternity leave and then start paying them back. If possible? In that case I'd go bigger and save on the hassle later and try keep your mat leave because that time you won't get back.

We were in a similar position 20 years ago. No regrets from me going for the smaller house. We fit just fine, we always had enough spare money for treats (nothing wild, just pizza or Saturday morning cinema, we are easily pleased) without having to worry, and we were able to pay off our mortgage early, which then allowed for a career change and a break in income, knowing we had a "cushion". Dh would have preferred a bigger house, but I don't think he fully appreciates how good it has been never having to worry about money.

Gifting money over £10k is a nightmare. Seriously the checks that they will have to go through repeatedly is insane. Obviously done for very good reasons (money laundering) but honestly such a pain.

I would totally go for the bigger one. You have two small children, you won't go out much. You won't have to pay any nursery/ after school costs whilst you're on mat leave. It's only for a year and if you take into account the cost of moving and increasing house prices it may actually become less an obtainable once you have to pay nursery fees etc.
Could you ask your parents to eek it out over 18 months?

My main concern would be that the mortgage lender won't go for it.

If it's only a year a year will fly by I would do it.

Great that you want to pay your parents back despite them saying no. It perhaps say you will pay them back over 2 years so you don't have to cut your maternity

I would go for a bigger house needing updating. If you can get a mortgage without borrowing money for the deposit then you could borrow money for new boiler, bathroom etc after you move in. Of course I say this without knowing the price gap. We have always bought run down properties and improved them ourselves.

I would go for the bigger house for a couple of years of tight budgeting.
Make sure you lock in to a good mortgage rate.
When dc are small, they just need some fresh air and parks. Add Library, visiting family, swimming and kids cinema and that's all pretty cheap.
Don't forget that buying the bigger house now, you're saving on stamp duty, solicitors fees and all the other costs associating with buying a new house and moving.

A year is nothing - it will whizz by! And you'll be in the right house. Do that.

@PeachOP Take it from someone who's currently moving house, school catchments play a huge factor. It's difficult once your kids are at school. We found whole areas, even whole counties, were closed to us because there weren't school places in our kids years groups. So many lovely houses and areas we could have moved to a few years ago but we can't now! It may not be an issue where you live, but it will be anywhere commutable to London, for example. Check out the schools now and move into the long term house. It's an absolute faff past Reception age (not forgetting you need to apply for schools the year before they start Reception). I wish we'd done the research earlier!

Are you parents gifting 100k? What does that mean for your monthly outgoings if you need to pay back?
Back in the day we tended to take 4 to 6 months mat leave max. Our dc survived

Smaller house = breathing space and financial "freedom" (imo)

As your parents are happy for you to repay over time, and to declare it as a gift (which may help for IHT if they both peg it anyway), I would buy the bigger house and aim to only start repaying them once you get down to 1 at school 1 at nursery, which is when you can start looking to earning more, and nursery costs are less.
You may be surprised how well off your parents actually are, certainly our pensions forecast are far above we could have imagined 5 years ago, so do take them up on the gift for now, even if you do not want it as a gift but as a loan. If you do repay it, then I would suggest it would be more valuable to them as payments later on when they perhaps cannot drive themselves to hospital appointments or need cleaners, gardeners etc.
Mortgage co will be happy if your parents declare it as a gift.

I would go smaller. We stretched for the larger house with a toddler and had our second within a year. I really regret being so financially tight during our children's early years as it made our lives unnecessarily hard and lacking in fun. We foolishly bought a money pit and had to pour all our disposable income into renovations meaning I had to work more hours than I would have liked. And despite a reasonable income we couldn't afford little luxuries that would have made the sleep deprived, stressful early years more pleasant like a nice holiday, cleaner or a night out for me and DH. We ended up burnt out and resentful of our choice. We also couldn't afford to overpay our mortgage at a time when interest rates were low so it's had a lasting impact on our finances and we didn't build much equity after renovations.

Things are easier now but I look back and regret the missed opportunities to spend more quality time with my children and husband and live a more peaceful life!

Go for the bigger one and put money as and when into savings to pay your dparents back.
When you add up the costs of moving again in 5 years plus the enormous hassle ( you will have to sell and buy at the same time and I cannot say how painful that is) plus another load of stamp duty (and who knows how much that will be in the future)

If the finances work, then bigger house every time.

The bigger house costs £100k more

Which parents wouid loan

But you can afford to pay £100k back in a year

Or have I got that wrong

You must earn lots to afford mortgage bills eveey today life and pay back £2k a week

In your case I would absolutely go for the bigger house.

The smaller one sounds uncomfotably small. Living in a too small house with little kids is not fun.

And moving again in a few years is also expensive.

It doesn't sound like your parents are pushing you to pay back the money so soon so I would make a payment plan that works for you so that you are not too tight.

Maybe you could get a lodger for a year or so to help cover the extra money until you really need that room if that is something you would be ok with.

I also lived in a smaller house when my dc were little and loved it. It was cosy, not too many rooms to decorate/keep clean, and the dc were never too far from me, I could pop upstairs for a minute knowing I would hear them if they needed me.

In that case, go with what you can afford. You might hate the idea of going back to work early.

We went with very affordable house and now I could leave work if I wanted, can afford lovely holidays and any days out the kids want. If costs of living go crazy or mortgage rates suddenly massively increase, it wouldn't affect us, so there's no stress there.

We didn't move after 5 years since the kids are happy in the small house and honestly having lots of money is a lot nicer than a bigger house imo (which would mean a lot more cleaning lol).