Not to buy the most expensive home I can afford?

[libertybonds]

Background:

I'm a single mum. I earn a decent income, and could earn much more if I didn't handle pretty much all of the child caring responsibilities for my daughter. She is about to start school and I expect at least another year of covid school closures etc.

My ex pays the CMS maintenance every month, but sometimes threatens to withhold funds. He was also fired less than a year ago. He bounced back pretty quickly.

That's all to say that there is a chance I could earn a lot more in a few years' time, but it's not guaranteed. I also probably can count on the CMS funds, but I'm fearful of doing so.

The housing options within walking distance of school are a small flat that is easily affordable, or much more expensive houses that would be harder to maintain and require updating. The flip side is that theoretically I could add value to a house, and I'm probably overpaying for the flat due to the insane property market (I have an accepted offer).

The traditional advice is to buy the most expensive home you can afford. AIBU to buy the smaller flat, when I could afford more? It has outdoor space where my daughter could play (but no private garden, just a patio) but is pretty small.

I'm guessing you are in London as those prices are mad. I would avoid flats - services charges, unexpected bills, neighbour disputes.

Could you get a three bed house that is liveable now and
Plan to update in a few years. I. E. As long as it has a working bathroom and kitchen, out off upgrade till your income improves.

Alternatively move somewhere cheaper

YANBU. Financial security every time.

If your career continues to improve you can trade up to a bigger house further down the line. You’re being very prudent- your DD is lucky to have you.

You sound like an excellent Mum and are doing the right things.

We've never bought the most expensive home we could afford. We've bought ones we could afford on a single salary if necessary.

Our home is very small compared to some in our social circle, but if either DH or I couldn't work for any reason we'd be OK. When I unexpectedly wound up pregnant with DD, maternity leave was not an issue and we were fine on the reduced income. When DH was furloughed in 2020, we were still able to pay the mortgage.

I prefer that to the larger house.

Another vote for the flat. We just moved to a different city, and made a tidy sum on our sale. One of the lessons we learned from Covid is just how much we value "doing" things. Meals out, weekends away, holidays. So we actually decided to downsize and buy a cheaper house than the one we sold. Mortgage is ridiculously manageable and we are topping up our savings (ready to spend when delta buggers off!)

Agree completely that kids care/value their surroundings much less than the adults. My kids each have their own room, as well as a "den" which is much smaller than our old place. They simply don't care.

I would buy the house, based on the fact that flats are less in demand due to covid and that where you do work to improve the house you can add value.

My sister bought the most expensive house she could afford and constantly stresses about work and finance.

We looked at doing the same but decided (wanting baby in the near future) that we would rather have a safety net of savings. We also quickly realised that there was always stuff to do in a house and it always costs more than expected so was glad we didn't stretch ourselves too thin. We don't stress about money and just enjoy life and that's more important to me than having the biggest house possible

[quote libertybonds]@VeganVeal unfortunately, interest rates don't really have anywhere to go but up at the moment[/quote]
Exactly. and for whoever said "I think the whole "buy the most expensive house" thing is a baby boomer hangover when they were guaranteed pay rises/pension/job for life and stuff that doesn't exist today. You could hardly be more wrong.

Mortgage borrowing limits and compulsory deposit requirements were set in steel by lenders and VERY much tougher than today. For which enforced caution we thanked god , when mortgage interest rates hit 17 %.

The traditional advice is to buy the most expensive home you can afford

I have never heard this advice. I’d buy the property that best suits your needs, and put any spare money in savings. Trade up in size as you need it.

We stretched ourselves to the limit when we first bought this house because we needed the space and needed to be in a particular school because of DD’s disability. It was pretty hairy for the first few years, but is much more affordable now as we have moved on in our careers.

Mortgage borrowing limits and compulsory deposit requirements were set in steel by lenders and VERY much tougher than today.

Yes, but the change began in the 1980s with deregulation. Banks began to offer mortgages, MIRAS was introduced, more competition came in to the market. The early 80s was when my boomer parents bought their first home. There were restrictions but the LTV wasn’t that much different. The checking of affordability was a bit more strict, but with the introduction of endowment mortgages in the early 80s, it was way more affordable to pay an interest only mortgage. The problems with these didn’t come to light until the late 90s.

One of the main differences with now is that at that time there weren’t the same fixed rate introductory offers which encourage people to buy at a level which can lead to a big jump in the future.

Both fixed rate offers and endowment mortgages were designed to entice people who couldn’t really afford it, to buy bigger properties than they could easily afford so it isn’t quite accurate to say things were wildly different for boomers buying property.

Yes, in London. I can't change areas for a number of reasons.

@BoredZelda

Mortgage borrowing limits and compulsory deposit requirements were set in steel by lenders and VERY much tougher than today.

Yes, but the change began in the 1980s with deregulation. Banks began to offer mortgages, MIRAS was introduced, more competition came in to the market. The early 80s was when my boomer parents bought their first home. There were restrictions but the LTV wasn’t that much different. The checking of affordability was a bit more strict, but with the introduction of endowment mortgages in the early 80s, it was way more affordable to pay an interest only mortgage. The problems with these didn’t come to light until the late 90s.

One of the main differences with now is that at that time there weren’t the same fixed rate introductory offers which encourage people to buy at a level which can lead to a big jump in the future.

Both fixed rate offers and endowment mortgages were designed to entice people who couldn’t really afford it, to buy bigger properties than they could easily afford so it isn’t quite accurate to say things were wildly different for boomers buying property.

I AM a boomer; bought my first property in 1971 with a 25 yr endowment mortgage. It's a myth EM's were a cheap way to borrow.

An endowment mortgage charged monthly payments of the loan interest, plus compulsory life insurance, plus the endowment policy.

Good idea to leave yourself some slack.

Save the difference in mortgage payments each months and then if you want to you can upgrade in the future without extending your mortgage so much. But you’ve also got an emergency fund to dip into