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AIBU?

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Original poster

Crazy plan to buy dream house?? AIBu ?

33 replies

Hatmadhatter · 30/04/2023 22:47

Just need some perspective and experiences please. And opinions on if I ABU.

we are mid 30s and have a mortgage of £300k. I am thinking that in order for us to buy our dream home we should do the following:

overpay mortgage for the next 7yrs so we will have £150k left and £270k equity.
Then take on another £400k mortgage and start overpaying this so we pay it off in 10ish years. Our salary will increase in the next few years as I move up the career ladder.

has anyone and advice or experience to share please ?

thank you

OP posts:
Murdoch1949 · 01/05/2023 05:04

What is this 'dream' home of which you speak? Is it to give you space to have children, or a space to entertain, or a status symbol? How will working hard and overpaying your mortgage affect your lives over the next 17 years, will you have to forego holidays etc in order to overpay? You have no idea what is round the corner, don't have a reduced life and then regret what you've missed out on.

GoodChat · 01/05/2023 05:44

Is this a specific dream home that you know will be available when you're ready to buy?

pompomdaisy · 01/05/2023 06:07

In 7 years your 670k home won't be a dream it will be an average house price!

hattie43 · 01/05/2023 06:12

pompomdaisy · 01/05/2023 06:07

In 7 years your 670k home won't be a dream it will be an average house price!

I was going to say this . Even now there are very unremarkable homes on the market for £670k and higher .

Summerfun54321 · 01/05/2023 06:40

It's pretty naive to assume your earning potential will accelerate at a significantly faster rate than house price increases. That's the opposite for most people right now.

Kiitos · 01/05/2023 06:49

There are far too many variables here. All you can do is look at your options when it’s time to move to another house. House prices may continue to rise sharply, interest rates might change, career plans could stall, health or relationships can change…
I think all you can do for now is to overpay/save as much as you’re able and see where that leaves you in time. The idea is feasible if everything stays the same, but I don’t think you can plan in exact figures.

Saracen · 01/05/2023 06:59

Overpaying on your mortgage is rarely a bad idea. Go for it and see where you are in seven years. In fact, if you've only done a back-of-the-envelope calculation, you may be pleasantly surprised to see how quickly the outstanding debt reduces, because you're paying less interest as you clear the capital.

Is your partner as much into the idea of buying a more expensive house as you are? Personally I'd rather pay my first house off completely and then start paying more into a pension than take on a new debt to buy a dream house if the one I was in was adequate, but everyone has different priorities.

makemineadoublee · 01/05/2023 07:15

Over pay on your mortgage if you can

But who knows what the housing market will be like in 7 years

MRex · 01/05/2023 07:53

Keep saving and reassessing; it sounds like you aren't ready for that size of mortgage yet, so all you can do is put yourselves in a better financial position and see what happens with wages and house prices. You don't need to be limited by 10% per year either, you can pay extra as a lump sum when you renew the mortgate rate. If there is ever a drop in the market, be ready to move quickly, because the gap between property prices drops and would be to your benefit. While overpaying is great and will save you heaps on interest, remember you'll need to save up the stamp duty too in the year before you move.

Nordicrain · 01/05/2023 07:56

What is your mortgage rate? Atm many people will earn more off their money saving it than overpaying their mortgage.

Generally house prices go up so you might find you are playing catch up. Can you move sooner and get a bigger mortgage sooner rather than overpaying your existing one? Sounds like it would cost the same.

Lcb123 · 01/05/2023 08:01

I cannot see the point in planning this so much. Buy a house that suits your current / 5 year needs and that is affordable now. Blows my mind people thinking this far ahead! And you have limited control on jobs and no control on the economy!

SweetSakura · 01/05/2023 08:06

It's impossible to comment with just those details..

But yes, a combination of overpaying mortgage/saving/climbing career ladder is pretty much the standard route to getting a bigger house so on the face of it it's not really a "crazy" plan

Minimalme · 01/05/2023 08:27

We started in a two bed, terraced house and worked our way up.

Had three dc, one with a disability which needs a high level of care. Forced out of my job and unable to get childcare, we went down to one wage.

We are now in aa two bed terrace, 200 miles up North.

We have never been happier.

CharlotteDoyle · 01/05/2023 08:43

Whether overpaying your mortgage makes sense or not depends on the rate. If your mortgage rate is comfortably below inflation, I would hold off and let inflation do its work.

MayDayMay · 01/05/2023 08:49

Sounds pretty normal to get a bigger mortgage when you move to a bigger house.

MRex · 01/05/2023 08:49

Nordicrain · 01/05/2023 07:56

What is your mortgage rate? Atm many people will earn more off their money saving it than overpaying their mortgage.

Generally house prices go up so you might find you are playing catch up. Can you move sooner and get a bigger mortgage sooner rather than overpaying your existing one? Sounds like it would cost the same.

It has never been the case that mortgages are offered at lower interest rates than savings. A fixed rate might be cheaper for a couple of years, but that indicates a shock on the way of much higher mortgage, where again reducing the mortgage in advance makes sense.

Fatandfunny · 01/05/2023 08:53

What do you mean dream home. Do you just mean move up the property ladder?

Nordicrain · 01/05/2023 08:59

MRex · 01/05/2023 08:49

It has never been the case that mortgages are offered at lower interest rates than savings. A fixed rate might be cheaper for a couple of years, but that indicates a shock on the way of much higher mortgage, where again reducing the mortgage in advance makes sense.

Show quote history

If your mortage is 1.5% and savings are 4.5% you are better off putting the overpayment in savings for the time you have those rates. That is currently the case of many who fixed before the rises. If things change of course you change your approach.

TweedPillow · 01/05/2023 09:03

We didn’t ever go for our dream home, we paid off our mortgage by mid thirties. Twenty years hence and we have had many wonderful holidays and lots of experiences and I have retired early. DH is younger than me so around three more years till he retires. I retired at 51 and now volunteer with a Charity I admire.

It is always a good idea to overpay a mortgage.

SallyWD · 01/05/2023 09:11

We bought two years ago and viewed many houses around £670k. They were nice but I thought we'd get something much more special for that money! We do live in a pricey neighbourhood though.
The thought of having a £400k mortgage in my mid-40s makes me nervous. You never know what life will throw at you.

willlow23 · 01/05/2023 09:11

No.don't over extend yourself for a house ever ! If you want to invest and have equity in property only buy what you can afford

produ · 01/05/2023 09:22

The thought of having a £400k mortgage in my mid-40s makes me nervous. You never know what life will throw at you.

Surely the relative part is relation to earnings?

MRex · 01/05/2023 09:23

Nordicrain · 01/05/2023 08:59

If your mortage is 1.5% and savings are 4.5% you are better off putting the overpayment in savings for the time you have those rates. That is currently the case of many who fixed before the rises. If things change of course you change your approach.

Show quote history

It still isn't the case that mortgage rates at any given time are lower than saving rates, individuals just have a fixed rate for a short period that's lower and then will be going onto much higher rates at the end of that time! Fixed rates are almost all 2-5 years, the 5 year rates are not as low and rates started going up in 2021. Meanwhile the higher saving rates are on accounts that limit withdrawals for a period of time. So perhaps some small number of people might want to save money for 2 years now and then pay off a bigger lump sum at the end of the fix, but they need to be very careful to schedule that withdrawal. A small number of people holding money for a short period of time and then doing exactly the same action in paying down the mortgage isn't "many people", and it isn't putting money in savings instead.

Newyeardietstartstomorrow · 01/05/2023 09:24

If I were you I would be in the best house I could afford now. If you can afford to overpay your current mortgage you can afford to move now to a more expensive home. House prices generally increase, so the gap between what you have and what you want will be bigger in another 7 years time. You don't know where your finances will be in another 7 years. Your wages are set to increase, but you might be looking at funding dc through uni, bulking your pension etc.

Nordicrain · 01/05/2023 09:27

MRex · 01/05/2023 09:23

It still isn't the case that mortgage rates at any given time are lower than saving rates, individuals just have a fixed rate for a short period that's lower and then will be going onto much higher rates at the end of that time! Fixed rates are almost all 2-5 years, the 5 year rates are not as low and rates started going up in 2021. Meanwhile the higher saving rates are on accounts that limit withdrawals for a period of time. So perhaps some small number of people might want to save money for 2 years now and then pay off a bigger lump sum at the end of the fix, but they need to be very careful to schedule that withdrawal. A small number of people holding money for a short period of time and then doing exactly the same action in paying down the mortgage isn't "many people", and it isn't putting money in savings instead.

Show quote history

It still isn't the case that mortgage rates at any given time are lower than saving rates

I didn't say that though, did I? I said it depends on what your rates are, whether it's worth saying or overpaying. People are so obsessed with overpaying mortgages they rarely consider if that is the best way to make the money work for them. I'm not saying OP should do either or, I am saying she should look at what works out the best. Jeez.