Should we take out a £1 million interest only mortgage?

[Scandala]

The following relates to London and it will sound utterly absurd to nearly everyone. We live in an ordinary house but have lived here so long we are climbing the walls. Mortgage is paid off (I know we are super lucky). We want to move closer to DCs’ school/s into an area that is sadly far more expensive. Stamp duty is crazy and it seems next step up on housing ladder in this area costs at least £1million more! This is for detached house with parking in leafy street, not mansions. Was astonished to hear broker telling me we are typical of people buying in that bracket and that they all take out interest only mortgages. The interest payments are no more than £1500 a month for £1.3 million. Our equity would be about 60%. Thing is, houses in the target area have soared. If they double in a decade in the same way that our more modest house has then isn’t it a better investment? We are mid-40s and 50 so not young. DC are still in primary school and we have years of school fees ahead of us. Combined earnings mean we ‘qualify’ for that size mortgage and can even go higher. Nervous at thought of starting again though but I guess it’s now or never. Are we mad?

My only advice would be & it's probably a bit trite but

1. don't worry about what other people have done investing earlier - envy can be the thief of joy etc If they hit a certain spot in the market - doesn't mean to say you will - I agree with a PP houses don't always rise as a % of their purchase price . Friend of mine bought a house - did it up & when she sold she realised sold price minus renovations , she made the same profit ( if you are interested in investment ) as the house she had been in before ( which was big enough and needed much less doing ) had she sold previous house

2. Do do allow for the unexpected with a big mortgage ( even if interest free ) . If it is a plan to keep the house for 5 - 10 years great but something could happen before that or at the time you want to sell it the market is not in the right condition to sell it easily. If you are planning on school fees as sure as eggs is eggs they will only go up.

3. It depends where you live. I think in some parts of London overseas money isn't pouring in so houses aren't going up so much - the likes of Wandsworth , leafy places will probably hold their value with well off families & a couple of very decent state schools.

So whatever you choose to do I wish you well , but my advice is don't worry what other people have done , that is done and dusted now. Make your own budget for your own family and decide whether you want a home for a while and then sell or just buy something you can afford to ride out the ups and downs over the long term. I can tell you London can go very up and down & I know this through bitter experience.

But I do wish you very well.

That is very sound and non-judgmental advice @BasiliskStare . If it’s not too painful, are you able to share more of your experience?
Yes this wreck could be an utter money pit. We don’t want to over capitalize on it either but it is in an amazing location (albeit at the slightly scruffier end of the street). But that street has shot us in price so much that we couldn’t even think of moving into a ‘done’ place unless rates were below 2% and it would have meant a 1% mortgage.