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.

I think I am going to go against the grain here and say either get the bigger house now or as someone lose said, buy a 2 bed that can be extended into the 3 bed you want.

My rationale is that you said that the payments won't be different, only the mortgage term by 5 years. If you buy the 2 bed, with the intention of only being in it for only 5 years, not only will you waste money on decorating and moving costs but presumably when you move to the 3 bed you will extend your mortgage term then anyway so you wouldn't be benefitting from having a shorter mortgage term now

Our plan is similar to what bonkers has done. First house is 2 bed terrace with mortgage affordable on one salary. However, we overpay by quite a bit so.significantly increasing the equity we have. If kids happen, we can fit in 2beds and stop overpaying. When we do choose to move to forever home, we will have a nice deposit and hence lower mortgage, particularly as interest rates are likely to have risen

Other friends have bought forever homes straight out at max mortgage available. They're tied in to paying for space they don't need (2ppl, 4beds) and now.can't afford to have the kids to pay for it as time out of work would cripple them.

So far, in.2yrs DH and I have taken 3yrs off our mortgage and increased equity by about £12k beyond normal payments... Touch wood plan seems to be ok for now!

Truffles - soz about that

Tapioca - our joint income is £74k. So mortgage for £240k house with £60k deposit would be 2.4 and for £300k would be 3.2x.

Porridge - yes, the payment would be the same or similar, but term would change. I know his quickly times goes by, so I'm pretty sure we would stay in the smaller house for at least 8 years. The bigger house would allow us to have a spare room for visitors, plus a box room for me to use as a dressing room - luxury I know, but no kids and all that. And it would be mire likely to have a garage, or potential to build one for DH, which is what he would really like.

For the place we are currently in, we were very cautious with what we borrowed, as it was our first mortgage and seemed like such a massive amount of money. This time, I'm just not feeling as cautious, which is unlike me really.

The other thing to add is that I am hoping to get a promotion at work, which I will find out about in the next six months or so. If that happens, I will be on a higher salary, and will get annual 2% pay rises. It may depend on what happens with my job situation.

I don't think that we have ever taken out a mortgage for the whole amount that was offered. The last time we moved the mortgage provider said that we could have a £400 loan, we took a £100 loan instead.

We don't have as big or flash a house as we may have done if we had really stretched ourselves, but we've also never had a sleepless night worrying about how to pay the mortgage. We will also be mortgage free this year.

We do however have a comfortable home which I love and that just about meets all our needs. Lots of hobbies mean that there is never quite enough space.

We also extended our previous house and may well extend this one. Much, much easier than moving in my opinion.

I think you should keep your options open. If you see somewhere which could be forever then go for it. There's not much reason to wait given your circumstances and the upheaval of moving is horrific.
However, if such a house is not on the market when you want to move then go for somewhere smaller.
The mortgage will not make a huge difference given the terms you mention.

If most of our money was tied up in our house, we'd have very little money to enjoy a lifestyle and would be more stressed about money.

Many of our friends went down the route of getting maximum mortgages and having nicer houses. They had more stress and less of life.

We have remained in our first married home. We've improved it and converted to loft so now have a big house (all he it in not the best location) with 2 more bedrooms than we need and a dressing room.

We also have disposable income so I have a horse, we go out at weekends a lot and eat out a lot. We also remortgaged and got on the buy to let ladder and I've done 4 if those now.

Personally for me, I'd rather have less property and have more money to live my life. Things have never been that important, our lifestyle has.

Once DD finishes school/college, we'll be trading up to get the house with land I've always wanted and can do so and buy outright or with a small mortgage. I'm 40 btw and we have a great life by living comfortable with our means.

I remember the late 80's early 90's with interest rates running at 15% so I'm cautious.

The safest option might be to buy a smaller house with the potential to extend it later if funds allow. That way you also get exactly what you want. In the meantime, overpay like crazy before interest rates rise, which they certainly will. I had a 15% mortgage once, it costs a lot more than a 3% mortgage.

We were in a similar position and decided to stretch as no kids yet. After a few years the mortgage will go down again. It is so lovely knowing we will not be moving again and loving where we live. Bear in mind any savings you make mean that you will need them for the fifteen grand it costs to move again in a few years. Your cake and eat it option is to find a house for 250 that is a forever home or you could turn it into the forever home.

joysmum, so you converted your loft and now have THREE extra rooms?

It really doesn't sound like you compromised that much in your choice of first home.

We are in a two up two down house ATM. It's in a lovely area, huge gardens etc. it was perfect for us as a couple.

However, now we have 2dc we could really do with more space. We considered moving a few years ago when dc2 was born. We could have afforded a 3 bed house, with an extra room downstairs.

However, for us, we've decided to stay put a bit longer, save, pay as much off our current mortgage as possible. When we move, it will be the last time...I can't be bothered for the step-up approach, moving to a slightly better house every 3-5 years. Plus in the long run you'll waste money, wjat with solicitors costs and moving fees.

In your position I would stay put in your current house until you feel sure you can afford the forever house and miss the middle step.

I have just downsized. It's supposedly a temporary decision until the right house comes along but I am loving it. Less costs, no stress around payments, easier to clean... I want to stay here and maybe add an extension. I'd say focus on a mid house in best area with great garden and extension potential. The folk I know who extended have ended up with better houses than those with originally bigger houses. I'm much more risk averse than my dh, he wants a bigger house again.

That difference of 60k is significant. I would compare the total cost of repaying both mortgages. Then consider what you could do with the money. Eg. Retire early etc

For me I would stick with the cheaper house. If you fill it with clutter you need to sort storage.

We maxed ourselves out during the property crash in 2008 and bought the most expensive house we could afford on the basis that the stamp duty alone was thousands of pounds and we didn't want to have to move again until we retire and downsize.

BUT we are very lucky in that we have a lot of equity in the house too and so our mortgage is only 50 percent of the value of the house. So whilst we are always mindful of interest rates rocketing (which personally I think will happen sooner rather than later) we will always have that safety net.

In addition, the ultimate protection for us is that we have an interest only mortgage (and so if the worst came to the worst we could pay the interest only for a period of time) and we significantly overpay on our mortgage (overpayment is now four times the interest element). This means we are reducing our mortgage exposure every month.

So my message is IF you decide to max out on mortgage it should be in the knowledge that the payment is affordable even if interest rates or circumstances change. You should look carefully at income multiples and what happens if the interest rates double (not an unrealistic proposition within the next couple of years).

Also, I know this is obvious but do check you're on the absolute best possible mortgage interest rate for your circumstances. We have just had our rate reduced by the bank by 0.1 percent and its made a difference of £100 a month. We could reduce our payments further but for us the ability to make overpayments without penalty is key to our paying off strategy.

we moved from a 3 bed where we had paid off the mortgage to a 4 bed 2 years ago. DH was warier than I was about having a mortgage again, but we decided that it was the best time to move for the DC (now 10 and 11) as they would get the most benefit out of the bigger garden and spare room to be used for TV/games etc. As it turned out, we couldn't borrow as much as we'd initially wanted to (DH self-employed and having bought a van in the previous 2 years it affected his income for borrowing calcs), so we had to use up our savings to make up the difference, but we now have what would be considered by most to be a small mortgage and are so not regretting the move. Our mortgage is currently half what my DB pays in rent for a tiny 2 bed terrace. Also, you couldn't pay me to go through the stress of moving house again!!

apologies if I sounded at all smug there, not meaning to!

How secure are your jobs? We had a similar decision to you a few years back and constantly thank our blessings that we opted for the smaller mortgate - I was made redundant last year, and subsequently ended up in a fixed term contract job (which ends mid next year). DH's company meanwhile have announced rafts of redundancies through 2014. We are in the very realistic position of potentially going from 2 secure salaries to none in the space of not very long.

bonkers have a master suite on the top for consisting of our bedroom, dressing room and ensuite. We went for maximum permitted development dorma size at rear of the house so no planning permission required, just building regs.

I would buy the forever home if the mortgage payments are going to be the same monthly amount. Although it means paying for an additional five years, I would have the security of knowing that I don't have to move again and find a huge sum of money for estate agent fees, legal costs, surveys and related moving expenses.
I would look at the mortgage being at least five years fixed rate initially, so that I can overpay slightly during that period (which increases the feeling of security and reduces the mortgage term).
Retirement age is continually rising so even if you took out a 20 year mortgage and didn't pay it off early, you would still be fully paid up by the age of 60 which is way before official retirement age.
Also,in 15 years time the remaining five years will be less in real terms due to the effects if inflation (£1000 monthly now, isn't the same as £1000 in fifteen years).

Should just add, if buying with a view to extending/improving then choose wisely. Not all extensions/conversions/improvements add more value to the house than they cost to do so beware.

Yes definitely job security is a major factor. And affordability when interest rates inevitably rise.

Then I guess it comes down to how much you want to pay for a dressing room and a garage

Just to add to what joys mum has said about extending; she is right, sometimes an extension can cost more than buying an equivalent sized house to begin with, and you have to contend with the upheaval of living in dust and mess for several months.
For example: 3 bed semi in good condition local to me will cost around £190k, a 4 bed semi with an extra reception room and bathroom will cost around £230k. You can't build a decent sized 2 storey extension for £40k, so around here it makes sense to buy the bigger house rather than extending.

Are your wages likely to rise?
Can you start to overpay In a couple of years reducing the term.
I'd go for the larger mortgage if you can do this?

I would stay put, get the pay rise, then go for the bigger house. Moving is expensive and a hassle, it sounds like the only reason you are contemplating the intermediate step is because it would feel satisfying psychologically. Not a good reason IMO- be as dispassionate and unemotional as possible when it comes to your finances!

Plus and contradicting what I just said, I personally would get more satisfaction from knowing we were in our forever home, than already planning the next move when we'd just moved in.

If you go for the larger house, could/would you consider taking in a lodger if one of you loses income? That would be more comfortable in a 3 bed, esp if you have 2 bathrooms. No idea what tax implications there are, but it would help out esp if interest rates go up?