How much to borrow?

[fizzyvimto]

We live in London in a 2-bed flat. We've been here for 10 years and love the area we live in but can't afford a family home here. We live in a shared ownership property so the jump to a house is just too big. House prices have just gone crazy and you're looking at at least £800k+ for a 3-bed house with garden. The share in our flat is probably worth around £300-315k.

So we're torn what to do. We're comfortable right now and will have paid off the mortgage in just over 2 years. We have a good level of savings. We have one DS but are bursting out of our little flat. We earn nearly £70k between us. Our DS will go to school in 2015 so our childcare costs will go down a lot next year. I work part time but might have the option to go full time again in a couple of years if I wanted to, whereas DP hates his job and would love to quit work or go part time. We don't want to stretch ourselves too much given that interest rates are likely to go up etc.

Would you stay in the area you love in a small flat and enough money or move out to a new area for more room? If so, how much would you feel comfortable borrowing in our circumstances?

Sorry for the brain dump but I'm going round in circles in my head and would love a new perspective.

Personally I would move.

£300k on its own would buy a 4 bed house with a little garden here in Gloucestershire and in many other places along the M4 corridor - and many people commute by train or car to London if you were to still need to get there for work.

I agree. If you will never be able to afford what you want in your current area, I would move out. It gives both you and your dh more options on job flexibility.

Have you got many ties to the area you're in - family etc? DO you have the sorts of jobs where you can find work anywhere or are you tied to the specific place you're at now? And are you likely to have more children in the future?

Personally I'd move further out of London. I'd always choose house over area.

No brainer.... I'd move to a less expensive area that has good schools. A lot of people arrive where I live now in Hertforshire that way. They have a baby, trade in a smallish London flat for a modest semi with a garden, borrow the difference and swap urban smog for the fresh air of a small town.

Thanks so much folks :). We have no family ties here (neither us is from London) but we have a good network of friends. We're both in industries that are mainly London-based, though we are able to work from home 1 day or so a week. We love London - not that we go out much now, far from it, but the option is there and shops/cafés etc are on your doorstep. The thought of a massive commute fills me with dread (have done it in the past) and probably an hour tops is as much as I can handle. I guess we're thinking of somewhere on the tube but 350-450k just doesn't get you much and I'm not sure about taking on a big mortgage when we've just almost paid one off. As I said, I'm going round in circles...

I would move - if you have that much equity then there are so many areas you could move to, and live mortgage free on a decent sized house with garden and good schools. You could then just work in jobs you enjoy pt and earn living expenses. What an amazing position to be in!

I would stay.
You have nearly paid off your mortgage? Fantastic.
Get a holiday home or caravan within a couple of hours drive for when you need to spread your wings.

But that's just me.

We're in a 2 bed flat in London, though not nearly at the stage of paying off our mortgage! But we are die-hard Londoners who wouldn't consider leaving, even though our flat costs the same as a huge home counties house. We have family here, I grew up here so I'm used to the idea of growing up in an urban rather than suburban area, I'm not very tolerant to long commutes, and our DS is at an excellent school here. I have plenty of friends who have left London though, due to house prices, and the ones who have stayed tend to be the stubborn ones like us, who wouldn't move in any circumstances. I would hate small town life, but it sounds like you're a bit less decided about staying here.

I would think carefully about catchment areas and the timing of moving as you mention your DS is starting school next year. If you moved after the schools application deadline you could be stuck with a school you wouldn't really want.

Although paying off the mortgage is a big milestone, I think if you have a young child you must be quite young and have the earning potential to be able to take on more? Obviously it's not idea but it's very unusual to be mortgage free with a young family anywhere, let alone London! What is the percentage of your shared ownership? Could you afford to staircase up?

Thanks all. We're early 40s so enough time to take on more, though my DP is unhappy in his job and would ideally like to give up work or go part time (not possible in his current job) or freelance. We own 70% but it's not possible to staircase due to the particular deal I'm on: it's low cost home ownership (or something like that) so not traditional shared ownership. I bought it on my own 10 years ago, then my partner moved in and started contributing, then I got a promotion. So before we had our son we were overpaying on the mortgage as much as we were allowed to/could afford, which is why we're getting close to paying it off.
I've lived in cities for the past 25 years, so I don't think small town life is for us really, but the suburbs of London (zone 3-4) I could handle I guess, though I'm not sure if that's even affordable given how crazy the market is just now. I guess we just need to look around and investigate different areas and see what we can get, then make a decision.

We moved from a 2bed flat in London to Hebden Bridge 2 years ago. It's a small town without small town attitudes. Easy to commute to leeds and manchester whilst living the rural dream! My DP kept his London job and works from home. I do miss London though.

I would move out. We're in zone 4 and commuting is only half an hour on the train. 5 bed semi for 400k are pretty common here. I think you'll appreciate the space as your DS gets older.

AnneElliot, a 5-bed semi for 400k sounds amazing. Whereabouts is that (if you don't mind me asking)?

Sleepy mum, I have friends from Hebden Bridge. It sounds like a lovely place.