London FTBs with a DC - to stretch for a mortgage or review my expectations?

[Somethingsgotthagive]

Properties we could have easily afforded a while ago are not at the very top end of our budget and would imply we need to compromise to very high monthly payments and cut on other lifestyle expenses (such as traveling and day outs, which for us are important).
I begin to wonder whether being an adult also means I should stop fantasising about the perfect property and instead settle for something more modest and keep our mortgage payments low in this time of high rates and instability. Would it be a mistake in the long run?
We are a family of 3 (1 DC pre school) in the London suburbs, we don’t want to move too far away from current are for a multitude of reasons.

Monthly repayments at top end of our budget would be around £2750ish whereas if we settled for something less “nice” or smaller, it would be more around £2200 (still a lot but feels low in the current rates climate).

We are FTBs in our 40s so not exactly expecting to climb the housing ladder much if ever.

Where do you want to live? Do you have to commute, and if so, where to?

And what's your budget - i.e. the house price, as I have no idea what your monthly payment figure equates to!

@EmilyTjP what I am asking is whether within our same area we should stretch to our limit and buy the best property we can afford or look for less exciting properties with a smaller mortgage.

BTW I am not asking for advice on area and where to live, that’s a bit off topic but thanks to all those who are trying to help and mean well

@BIWI I want to live where I live now, it's not a matter of getting a bigger property elsewhere but to decide whether to stretch in current area of not stretch in current area

@MidnightPatrol

• what are the two house options like? 2 bed flat vs fancy 2 bed flat potentially with a garden
• will you need to compromise on location? no, I want to stay where I currently live
• what is £2750 / £2200 as a % of your take home pay? Take home pay between the two of us is around £6600

Well most people move out of London because they can’t afford the type of property they want. I don’t think you are unique in having to make compromises. 🤷🏻‍♀️

@Herdinggoats but my post wasn't about whether to move out or London or not

@Somethingsgotthagive no childcare costs?

• £2,750 from £6,600 income is high IMO.
• But - I’d also say you should probably buy the best property you can.
• You need to work out how you can increase salaries a bit to accommodate.

Max out the term, this might bring the price down a bit in the short-term (eg 35 years).

I would generally avoid paying at the top end of the range for the category, eg I would avoid buying an expensive 2-bed rather than a moderate 2-bed, because when you want to move it's harder to find buyers for the more "fancy" properties as many ppl would want an extra bedroom rather than a fancier 2-bed. Having said that, with a preschooler a garden is a game changer, and if garden flats are relatively rare it could be desirable. In a similar situation I stretched to buy a place with a garden and definitely don't regret it. If it's a really nice place, and you think you would make good use of the garden (and have the energy to look after it) and it would help the flat to last longer for you, it might be worth the stretch. Otherwise, I'd buy a pleasant 2-bed, overpay the "extra" amount the other one would cost per month, and plan to upgrade in a few years.

Have you stress tested this figure incase interest rates go up again in 2-5 years?

We aren't in a completely dissimilar position except we are second time buyers but will have to borrow more than we borrowed the first time to move up the ladder.

I'd like to say, let's buy a small house that needs work but small houses are still £800k and £100-200k to do up. We are going to be majorly restricted in what we can buy and know that to buy a house at all, we are going to have to borrow the max we can and hope that in a few years time rates will have dropped slightly.

I really don't want to be paying anything starting with a 3 per month but I can't see how we will be able to buy anything unless we do. So for me, I'd borrow the max we can and hope things improve rates wise in a few years time.

@MidnightPatrol Yes, we are paying £1200 per month in childcare and will do so for the next 18 months. After that, we will still need morning and pm clubs at school so expect to pay around £600 per month.
Max we can do is 30 yrs due to our age I think

@kirinm if you don't mind me asking, why would you move if numbers are not looking comfortable?

Has a mortgages broker confirmed you can actually borrow this much?

Id be surprised if they were comfortable with the £2,750 + £1,200 a month childcare.

Just a different perspective, our monthly income is about £6100, our mortgage is £1265, it actually feels quite a lot once you add in the cost of 'everything else.'

I think £2700 is too high, I'd go for the smaller mortgage, or just have a think about other areas in case you come across something you'd not thought of.

100% second option.
What are your partner’s thoughts?

@Kapalika same as me

Because we live in a small flat with our now 5 nearly 6 year old. We bought our flat as a do-er upper 8 years ago and didn't intend to stay there as long as we have. We thankfully no longer have to pay nursery fees (although still pay for holiday clubs and wraparound care) but if we don't do it soon, we might potentially be priced out forever.

If you happen to want a 2 bed flat in zone 2 with a very large garden, let me know 😉

I think you need to be realistic about what you can actually afford and not overstretch yourself - in house buying there is always compromise whether it is location/house/price

i would say on those figures price isn’t something you can compromise on and need to stick to budget so you need to compromise on location or house.
as location is so important yes it will need to be the hoise

@Tiswa it’s true.
It’s going to be a compromise anyway given area vs budget, I am just not sure whether to stretch to our max for a “nicer” compromise or not wise to do that

In a very similar situation, always assumed we’d move “up” in a few years but sticking with this level of mortgage for now as anything more feels scary with childcare costs.

That said, friends who stretched themselves have always come out of it very well and made loads of money (on houses tbf) whereas our flat has stayed the same.

I moved from London zone 2/3 to a commuter town.
In London I was 6 miles from home and the tube used to take 45 min. Sometimes I used to run home and it didn't take a lot longer.
Now I live in a commuter town, my door to door commute is almost the same time (45-50 min) but it is way more expensive and much more difficult to find alternative routes if there's a problem on the trains....so I can see why people want to stay closer to London even if you compromise on the property

We stretched ourselves and moved out to zone 6 (from zone 3)

Best decision ever. We decided that having the space to grow was more important to us.

I would not be looking to buy a 2 bed flat when I had 3 kids. I would stretch myself and look at location

@Somethingsgotthagive i think the one factor you haven’t included in your calculations are the ground rent (usually reasonable but not always) and the service charges which can vary wildly in a leasehold property which almost all flats are. Beware if any of the properties you are considering are ex LA owned as the section 20 notices issued can be eye- watering. Your mortgage payment will be the least of your worries. You might also want to consider the length of the lease when you reach the term of your mortgage. Will it require extending so someone else can buy the property off you when the time comes? Are the ones you are looking at even mortgageable? Lenders have rules about lease lengths, the floor level it is on, the % of properties already mortgaged within the building and cladding. I know you don’t want thread about moving out of where you are now, but given a choice between a freehold house in a zone further out vs a leasehold flat where someone else can spend my money and have no obligation to make the costs involved as inexpensive as possible, I know what I’d choose. Flats are more expensive in conveyancing costs, managing agents are an absolute PITA to deal with so consider these factors before you make any offers.

@Netaporter I know, I am thinking of all this but at the end of the day it is all a compromise and moving further out doesn’t fit our life at the moment for a multitude of reasons.
@moleeye well we only have 1 DC