Are we being too cautious buying a house.

[Sandles12]

Basically my partner and I live in a 3 bed terrace house with two children under 4, smallish house and not much of a garden. I bought it 7 years ago when it was really cheap and it's fully paid for so we are mortgage free. It's now worth roughly 115000. We have also saved about 80000 between us over the last four years or so. We both earn about 43000 per year before tax and live comfortably. Not extravagant but we do treat ourselves to good food etc. I am currently on mat leave so not earning much ATM.

We feel we have outgrown house and have been viewing houses for over four years. We are looking for a house in the region of 250000. Every house recently has gone way above the asking price. We are looking for a four bed with two living rooms and a decent garden, garage if possible. We are pushing 40. For example today we viewed at house on market for 250000 but there was already an offer of 270000. It was a lovely house but no garage and not the biggest garden. Also right beside road so we did not think it perfect. It got me wondering about the people who out the offer in, are they better off than us or just willing to pay a large mortgage? Who knows.

Just wondering are we being too cautious? Always wondering will there be a drop in prices soon. Seems to be people are going a bit crazy when it comes to house buying.

I wouldn’t wait any longer. This is your family home you are talking about - if your plan would be to live there for 20 years minimum then just get on with it. It will be worth more than you pay for it in 20 years even if not in 2 years. Your reasons for being cautious imply you are looking at it purely from a short term and investment-only lens. Your £80k is presumably earning nothing at the moment.

Buy somewhere better at £350 - a £150 mortgage is hardly expensive when you're just 40

It depends how desperate the OP is to move and whether she's happy to overpay for a house now and potentially be in negative equity during the next decade.

Given the amount of equity she has, this is incredibly unlikely. She would have to overpay by a very significant amount and there would have to be a very dramatic fall in house prices.

OP, I do think you're being cautious but as a PP said there is no point going for a house you're not happy with. I'd wait until you see something you really like and then put it in a good offer.

Ultimately you aren't buying an investment you are buying a home. So does it matter if values oscillate? The key is can you afford to live there and will it give you a good quality of life.

Ignore the investment side. Sort yourself a home you want to live in and can afford to live in

Not everybody in mumsnet land live in million pound houses.

A quick search around me found this house within OPs budget, so its more than possible.

www.zoopla.co.uk/for-sale/details/57437897/

Also don’t second guess why someone else would pay a certain amount for a particular house - ultimately houses are only worth what someone is prepared to pay for them, a valuation is essentially just a guess as to what someone might be prepared to pay in today’s market. But individual circumstances also play a huge part in that.

I understand the draw of being mortgage free, but if you want a bigger house and you’re under 40 with small children then I think now is the time invest in that and get a house that ticks all your boxes

I’d personally look at properties in the 300-350k bracket. Hopefully that will give you a good balance between a decent forever home and a manageable mortgage

House prices seem unlikely to drop (especially the family homes you are looking for).
Unfortunately there is not much coming onto the market at the moment. I expect that to perk up late Spring, but demand will likely continue to be high.

If you want to move, like seriously move, I'd up your budget and get a bigger mortgage. It's not like you can't afford it, and you'd be able to still get it for a lower amount of years.

If you stick at what you're budgeting for, you'll be stuck in your current house for a long time. If you're fine with that, then stick it out, but I wouldn't expect prices to drop any time soon. In reality, they may continue rising for a while yet and then you'll really be priced out.

It’s a good time to think about everything. You say partner so I assume not married. So house is yours if you split. You are talking we in new house - will you jointly own, how will you deal legally with fact your asset is forming large part of deposit. You mention Mat leave and dropping to part time so your earnings and pension taking a hit - if you aren’t married then there’s no pension sharing if you split to reflect your contribution to family life so having a house could be invaluable. Even if you buy at 300,000 your mortgage £100,000 for a couple earning 43,000 joint isn’t large. But I would urge you to think about what ifs and both get legal advice.

Our house is about 350k with a mortgage of 215k, two young children with childcare around 650 a month. I work part time and partner full time. Both of us around 40k full time salary’s.

I would say you could push to 350-400k for a house easy. If you have 200k as a down payment.

@Dixiechickonhols

It’s a good time to think about everything. You say partner so I assume not married. So house is yours if you split. You are talking we in new house - will you jointly own, how will you deal legally with fact your asset is forming large part of deposit. You mention Mat leave and dropping to part time so your earnings and pension taking a hit - if you aren’t married then there’s no pension sharing if you split to reflect your contribution to family life so having a house could be invaluable. Even if you buy at 300,000 your mortgage £100,000 for a couple earning 43,000 joint isn’t large. But I would urge you to think about what ifs and both get legal advice.

On that though, she could ring-fence her contribution to the deposit. Like the 115,000 from the house she sells would be hers only, and then x amount of the savings. So if they use 60,000 of the savings, 30,000 are hers alone to ring fence, and 30 for her partner. Then if they split, they get that back when they sell the house.

Your savings are now not worth what they were 4 years ago due to inflation. The person paying £270k would be borrowing say £230k with roughly 15% deposit, and that's if they're not using a load of equity. That's not "massive" for some households.

You were being too cautious. I wouldn't personally upsize this year.

I’d buy a 3 bed you can extend to make a 4 bed. Loft extensions are usually the best return. You are always going to pay a premium for a ready made 4 bed house but it’s easy to add a loft extension or side / garage extension to many smaller houses if you find one with a big enough plot.

Allofusaredead Yes absolutely lots Op can do I’m just flagging up she needs legal advice as she’s currently got a £117,000 asset in her dole name.
Not saying don’t buy jointly just make sure it’s protected and provisions in place like wills etc. CAB has a decent guide re cohabitation and things to think about.

I think in your situation I would wait a bit. Maybe a year - where we are (south west) I'm beginning to see a few reductions and not so many houses being sold the same day as listed, but who knows what will happen? You know that you're in a very good position financially and can get the four bedroom house you want.

Personally I would not consider buying a three bed and extending - too uncertain, with the difficulties of getting decent tradespeople and the increasing cost of materials.

While this is a very personal thing, and not strictly relevant, I would urge you to seriously consider protecting your personal equity in your house if you aren't married.

OP, waiting to buy a house is a fools game. No one ever wins trying to time the market.
Will prices fall? Why would they? It’s not like there a huge supply of housing being planned.

@Dixiechickonhols

Allofusaredead Yes absolutely lots Op can do I’m just flagging up she needs legal advice as she’s currently got a £117,000 asset in her dole name. Not saying don’t buy jointly just make sure it’s protected and provisions in place like wills etc. CAB has a decent guide re cohabitation and things to think about.

Yeah definitely needs to be safe.

One thing I just thought of though, would that ring fencing still apply if they got married after they bought the house? Or would it be ignored and done 50/50?

Try thinking about your current house as an asset: if it’s worth £115k at the moment, and properties are being snapped up above their asking prices where you live, then that £115k is more likely to end up as £125k when you sell, leaving you with a deposit of £205k.
If you then take out a mortgage of £150k (around 3.5 x ONE of your salaries), then purchase a house for up to £320k, you’ll be left with some savings, and will have future-proofed yourself against working part-time, rising interest rates and increased childcare costs. And you should be able to go for the houses that were previously available for £300k, and be able to offer the additional amount required to secure one!

What area are you in? Sounds like you are being very cautious. Prices might go down but due to supply and demand they may not drop at all. Its a gamble. If you don't play you will never win anything. Your need for space is practical so take the risk. If priced drop by 10 years they will be back up again and it wont matter because you want to enjoy your kids before they move out.