To ask if this was actually a mistake? (House purchase)

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In 2021 I owned a home with a 100k mortgage. It was valued at 285 and I sold for exactly that. I was overpaying the mortgage massively (600 a month repayment and then 500 a month extra). I worked out that within 5 years I could have paid it off in full, alongside some savings I also had.

Instead… I bought a home in 2022 with a 300k mortgage. Even though I am in the best loan to value category with the bank, my repayments are now 1,300 over 25 years. Obviously if the rates still stay high in the next 5 years then I may struggle to repay at all and have to sell.

I was encouraged to make this move by family who have made a lot on climbing the ladder with their homes. I did want to move somewhere bigger and this house is twice the size of the first one but I can’t help thinking it would have been better to have stayed put?! I could almost have paid it all off now but instead I am lumbered with this huge mortgage and I don’t have much more equity to show for it, so I haven’t gained by buying a bigger house have I?

Gains in the property market are generally longer term, and especially in this market. You have a bigger house, it's currently valued at more than you paid, so they are gains.

Financially yes, space-wise no.
Climbing the ladder is all about upgrading and you’ve done that - I can’t really see what the problem is.
Of course a big house is going to be more expensive, but that’s rather obvious.

You’re over complicating it.

You either have a small, cheap house that is fully paid for early on in your life.

Or a larger, more expensive house that isn’t fully paid for until later in life.

Property is long term accommodation not a quick moneyspinner so I wouldn't worry about it. That said I have made money and increased equity but I've done it by moving locations. Started with what felt like a massively overpriced central london studio, sold and for the same price bought a 2 bed in zone 3. That I sold to buy a house on the outskirts of London and then sold to move far out of London into a house in the countryside. Mortgage always about the same as I purposely planned the moves to be cheaper each time rather than increasing mortgage. I have definitely benefitted from price rises but everything was rising so it was the long term plan that made it work

Do you like your house?
Does it suit your needs?
Can you afford the mortgage?

That's really all you need to focus on. Gains (or losses) on your property price will come in time.

I know where you're coming from except I ignored them. To me being in a smaller house meant mortgage free, lower utilities and council tax and less cleaning. I would rather enjoy the extra money now than when I'm retired. Sell up, downsize and enjoy the freedom!

It was a really bad time to buy as at the top of the market but it’s done now.

What you need to take from this is that relatives are just people you happen to share blood with and who are not especially expert in anything, unless of course it’s their job and even then people can be bad at their job.

With any investment it’s a timing thing, I assume these relatives are older than you? Quite often gains with housing are purely accidental. They probably think they are good with money because they happened to buy at a good time. I bought at a good time but it was because I needed a home. In 20 years the gain is close to 400%. The area I live in used to be crap but it has gentrified as people move further out due to the city being expensive, that was pure luck.

The people that bought the exact same house as us next door 3 years later paid exactly double what we paid for ours. Again timing just unfortunately bad for them.

Agree with this

Not in the long term. Houses will increase by a percentage over time, so let's say (using round numbers) that they will increase by 10% over 5 years. Your original house would gain £28.5k whereas your new house will gain £49.2k. With the Trussterfuck of last year, the market is unstable but it will settle eventually.

The other thing that will happen is that the value of money will decrease due to inflation, so £1 this year will not be worth £1 next year. So while your mortgage payments seem high now, as time goes by, your wage should improve and it won't feel so bad.

In the short term though, you are correct in that you haven't done anything otger than buy more space, although that must have been a reason of some sort?

Presumably, if you bought in 2022 before the Trussterfuck, you were able to fix your mortgage rate low for the entire term?

I agree with all of this apart from the last sentence. In the U.K. people don’t fix their mortgage rates for the whole term but only for 2,3 or 5 years or occasional 10 at most.

We did similar last year OP but didn't jump up as high. The house we moved to was bigger, in a better location but needed work so whilst the mortgage repayments are low until the fix is up in 3yrs, we have the added costs of reno work but I see this as short term pain for long term gain.

You’re not going to gain anything financially in such a sort period of time, and I’m genuinely surprised that you expect that to be the case. The only way that could have happened was if you bought a fixer upper.

It takes time for house prices to increase to a point where you can say you’ve made a profit. I suspect the covid house price boom (which is now balancing out) may have tinted your view a bit, buying ordinary homes isn’t a get rich quick scheme.

I did. The interest rate was hardly going to get lower than it was, so fixing for the duration was a no brainer. I agree that it isn't usual, but one has to look at the circumstances. I fixed when the base was 0.25%, and now have the next 13 years without having to worry. I sort of assumed that everyone would do the same.

Well your current house is worth nearly half a million and you owe 300k on it paying 1300 a month on a property worth half a million is a super good deal

The gain is your location, the size of your property, and the future price increase of the property.

You really ought to try to overpay

Shoulda woulda coulda. You can’t change it, so try and focus on the positives of your situation now and plan for the future

No it’s extremely unusual in the U.K. to fix for 25 years or whatever the lifetime is. Who was the Lender, out of interest?

Most lenders will do this if asked. They don't often advertise it though. I have two mortgages, on with Bank of Ireland, and one with Virgin Money. Both fixed for the whole remaining term. I've done the same with C&G in the past too.

Not quite. I did say that I have 13 years remaining (fixed when 15 years were remaining), however I've had long fixed rates previously when I was younger. I wanted the ability to budget and took the risk that I would lose if the interest rate went down as I wanted certainty.

I did it with Halifax about 20 years ago, however I am driven by the interest rate, not the lender. If the main high street banks don't offer what I want, I'll go somewhere that does.

Interesting @HappiestSleeping thanks for sharing

It's a house, not a magical box that shits coins

You've gained having a bigger house... presumably you needed the space?