To ask about your experiences with mortgage size?

[Saurus72]

Me and DH (no kids) have lived in a small house since we got married, paying £600 a month mortgage. We are now desperate to move to a larger property, which we are planning to do next Summer. We are likely to have around £60k to put down on our next place. The issue is deciding whether to go for a 'forever' kind of house, which would not be huge, likely to be a 3 bed period house for c.£300k, or a step down from that, a smaller 2 bed house costing c.£240k, which we would be likely to be fine in for a good few years, but would probably want to move on from after, say 5-6 years.

The considerations are that the larger house would mean a significantly larger mortgage as we would only have a 20% deposit, plus we would probably go for a 20 year mortgage (we are 40) which doesn't feel great psychologically, as we only have 18 years left on our current mortgage.

The upsides of moving somewhere we are likely to stay for at least 10-15 years us that any home improvements we do we will be able to invest in and enjoy the benefits.

If we go for a smaller place, our mortgage interest rate will be lower due to having a 25% deposit! plus we'd be likely to be able to reduce our mortgage term to 15 years, which feels good. But then there us the niggle that we will have to pay moving costs again a few years later. Psychologically, not having as big a mortgage, and having it over 5 fewer years would feel really good.

For both options, our mortgage payments will more than double from what they are now, which us affordable, but will mean we will have less disposable income. The thing about yes us that we're great at paying bills - have never missed any bill payments for anything ever - but we are also really good at spending any money that's left over iykwim. I don't want to become a slave to our mortgage, but neither do I want to squander money when it could be used towards greater financial security in a house.

Any views/ experiences gratefully received. This has been rumbling around in my head for a long time, DH tired of talking about it but is as undecided as me.

Why don't you try saving the "extra" amount you would be paying between now and moving time. Initially try to do the larger amount. Transfer it out of your account the same day as your mortgage payment into a savings account.

Will also give you a bigger deposit when the time comes.

All I tell you is that I am greatful every day that my DH and I didn't go for the most expensive option when in a similar position because life can throw changes at you and if we had it would have crippled us when the recession hit us. Never let your monthly mortage payment go over one weeks wage is the old fashioned rule of thumb.

i am in no way a financial advisor ( not even close)

but i would be very wary about taking on a large mortgage right now

i am of the opinion that interest rates must rise

yet wages are unlikley to and the economy remains largely unstable (IMO)

also, just in terms of being sensible - i am sure you and your DH are incredibly happy and will be together forever - but, y'know who knows what the future brings

We moved from a small flat to our family home and increased our mortgage from about 900 to 1200 per month- problem is our council tax has also gone up and gas etc To be honest we LOVE having the space but are totally broke and not enjoying very little disposable income.....also when interest rates go up we are going to be struggling. Not terribly helpful??!!!

Depends on your attitude to risk.

We have had unnaturally low mortgage rates for years now. Sooner or later mortgage rates will rise. What might be affordable with a 3% mortgage could be a nightmare with a 10% mortgage. In the past the bank of england rate has been 15%.

Mortgage payments do ease a little bit in that inflation does eat away at a mortgage. However that is only assuming that earning rise with inflation.

I suggest that you overpay on a mortgage while rates are low. If rates rise then you can go back to your regular payments.

sorry that sounded very school marm! Very difficult to stick to the old rules, I know. Just what worked for me. ifyswim

Lurker - yes, we are currently saving, and paying off the last few months if my car payments.

Lois - not schoolmarm at all, I've never thought about the one weeks wages, but that sounds sensible.

Really tired - I think I have quite a low appetite for risk. Will not be funny if we are lying awake each night worrying.

The actual mortgage payments on a monthly basis would be about the same for both options, it's just the length of the mortgage term that would differ possibly. I think I'm thinking too much about it! A lovely 'dream house' sounds appealing especially as we have lived somewhere so small for so long (7 years). A 'good enough' house would be lovely too though...

Forgot to add thanks for all your replies!

Move to the smaller one, and stay there... Enjoying all the saved money on whatever it is you enjoy, if it's good enough for 40-45, how is it not good enough for 46-55 ? What really changes in those times?

I think if you went for the smaller house but specifically chose a mortgage that allowed you to overpay you could make huge contributions to your mortgage.

Say for example the two bed mortgage would be £1000 but the three bed £1250 (total guesses but bear with me). By living in the 2 bed, you would be repaying over a shorter time frame so would pay less interest overall, and if you felt comfortable over paying the (guess) £250 difference then you could. That way you save a lot more and have the security for the future.

I spoke go a financial advisor recently and his advice was to make sure you get the mortgage over the shortest time period you can afford because that's where you make the biggest savings.

Do you plan on having kids? If not I don't see why you'll need a bigger house in 5 years?

I think it depends on what you see yourself doing in the future.

We got a much lower mortgage than we could afford when we bought our first home (the one we are still in now 16 years later) and have had a brilliant time travelling, being able to save and both being able to work part time.

We now have 2 children (14 and 4) in a 2 bed terrace and we need to move. We could easily have bought a 3 bed 16 years ago, but I don't regret that we didn't because I think we're going to look back and be more thankful that we did all the other things rather than have a larger home.

have u factored in child care costs if you have children ? we are in an ex local authority house which although lovely three bedrooms etc ... if we were not paying £700 / £800 per month child care we could be in a private 4 bed 3 bathroom detached house x but I would rather have smaller house to start of with ,then when kids at school can look at moving up x

Now see this is really helpful and just what I needed!

I guess the thinking behind feeling we may want to move from the 2 bed place is that I know it would be relatively small, and there is a tendency to grow out of spaces over time. Whereas with the 3 bed one, we'd be likely to have all the space we would ever need. After so long in a small space, I feel the need to breathe out IYKWIM.

However, I also know that when I say 'grow out of', I think I really mean, have too much clutter. So it would just mean buying less but better and being organised and tidy. And yes, the option of a shorter mortgage term, and overpaying are good. Especially as we love doing stuff - holidays, restaurants etc - and I while I don't mind reducing those things, I would hate to work just to pay a mortgage.

No kids, a very very vague idea re: adopting, but I think that is unlikely.

' Especially as we love doing stuff - holidays, restaurants etc - and I while I don't mind reducing those things, I would hate to work just to pay a mortgage.'

I think you've answered your own question. Good Luck wherever you end up!

Lois - yes, I think you're right

Finding a way to sell / dispose of your clutter would be a good idea too!

I've been speaking to a couple of financial advisors and they have been if the opinion that if you are going for a larger mortgage to it earlier rather than later. It might be worth looking into at what ages the ability to take out certain mortgage lengths decrease. For example I can still take a mortgage out over 35 years but no I won't be able to for much longer

Of do

In your shoes I'd buy a 240 house with the potential to extend when you have spare funds. Or a 240 house where you can extend into a garage or have a room/office/yoga space in the garden.

I also think good space management and decluttering would help you fit the space.

I've also heard the same as Rpitch though. Ive been told its best to get a big mortgage when younger rather then older.

I was hoping this was a cock euphemism thread....alas.

If you can cope with a max mortgage depends on many elements. What's your present ratio? For example when I bought my house it cost 60k with a 55k mortgage. I was earning about 18k - so in effect the house mortgage was three times my salary. How many times your joint salery would house A and house B mortgage be?