To stretch with a bit mortgage or be happy with a modest home?

[Clementiness]

London based; DH and I are in our 40s, first time buyers and have DC. We have the option of buying a nice (albeit small-ish) house in the home counties at the very max of our budget (which will be a stretch due to current rates but doable) or a cheaper flat nearer London, where we live now. We see the house as a place where we'd stay much longer whereas I fear the flat will be a cheaper option but somewhere we wouldn't want for the next 20 years, iyswim.
I don't know whether at our age we should just be more careful with our money and just accept life doesn't sometimes work out the way we want and go for the cheaper flat.

AIBU thinking I'd prefer stretching for the house?

@KevinDeBrioche I know :( It's easy to get used to it when these are the only options but I agree paying £2500 in mortgage repayment for a small 2 bed in the home counties is brutal

Personally I’d go for the flat if things like lease length and service charge aren’t an issue. You’ll save a lot on commuting and the kids as teens will have so much more to do in London, not to mention public transport. Biased as my parents moved out of London for a house in a boring commuter town rather than a flat in London and I wish they’d stayed in London! Plus flats are much easier in terms of upkeep I find. But ultimately it depends on your priorities and personalities as the price difference isn’t huge.

I agree OP it’s so much money isn’t it, unfortunately you sort of get used to the really big expense every month and just cling on to the idea that in 5 years time you would have paid off X amount and that is money gained if you want to sell. Rather than renting and paying that money but not paying anything down or gaining equity.

Edited - sorry I realise you said above you wouldn’t consider a cheaper area..’I know this isn’t what you asked but I wonder if you are able to be flexible on location as there are lots of places commutable to London that might be more affordable and you will get more than a 2 bed.’

With that difference, I'd go for the house. It's a false economy to plan to move again soon as stamp duty and moving costs are so high.

Assuming the house is freehold I would go for the house. You have a short period of pain with childcare but in 3 years that'll reduce significantly. Moving costs a fortune, stamp duty alone is hefty.

Just make sure you have something in the pot for boiler breakdown, etc.

Also take insurance if you don't have indefinite sick pay with work, etc.

I also prefer the house as they tend to hold their values better. But you need to know if the commute is doable for you and your DH. The mortgage is shocking really. We are late 40s early 50s with two DCs and our mortage is under £800 for a 5 bed house. We were first time buyers in 2009. I don't think you want to know what other people are paying for their mortgages. It's not helpful for your situation either.

Also, OP I’m not sure if you’ve seen this before but the Money Saving Expert website has a great calculator that shows how much you will have paid off your mortgage each year and you can also calculate overpayments

https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

Is it 2-bed house Vs 2-bed flat, or can you get an extra bedroom if you buy a flat?

I don’t have a clear answer for you but I do know that houses cost a bloody fortune to maintain. Especially if they are period properties. Mine is early Victorian and it is a money pit. There are also really limited options for improving energy efficiency. My friends in blocks of flats last winter wee all toasty warm . I spent the winter under a heated throw.
gardens are good but kids quickly lose interest and are pretty much unusable 9months of the year in the UK.

The house is a much better option with kids. A flat has all the noise issues and shared maintenance. Also in your 40's you will get the mortgage and be able to pay it back. If you wait 10 years then it may be much more difficult to borrow the amount you need to move ( you said the flat isn't a forever home).

Don't forget that you have to pay maintenance fees on a leasehold property like a flat so you're better off buying freehold.

Which zones are you looking at and have you considered proximity to future primary and secondary education? Hopefully, as you're buying property just once then you need to ensure it's the right long term choice.

Look at Bromley and Bexley boroughs which fall within budget and are in zones 4,5 & 6. You can get into Charing X, Cannon St, Victoria, Farringdon & Kings X stations within 30mins from these London boroughs.

Not sure what your budget is so put a broad search value of between £400,000 to £650,000.

https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E225&minBedrooms=3&maxPrice=650000&minPrice=400000&radius=1.0&propertyTypes=detached%2Csemi-detached%2Cterraced&mustHave=&dontShow=&furnishTypes=&keywords=

“Buy the best home you can afford and drive the worst car you can get away with”

not sure where I heard that but I’ve always tried to follow it.

If the house is your preference and you’re able to stretch to it then I would definitely go for it

When you're buying a house you have to consider what what you have never considered before. It sounds like you're not being as flexible as you could be in order to open up your options. The mortgage you mention is huge.

I'd suggest you look at houses in places you haven't ever considered, only to get an idea, and sometimes that completely changes your outlook.

Good luck!

OP we have almost exactly the same income as you with similar costs on childcare and I can tell you, that mortgage seems high. Our main bills are £1000 ish on childcare, £1200 mortgage, £750 food, £250 car, £250-400 for gas & elec during the winter. There’s normally some unaccounted for cost each month so we probably save £400-500 a month tops. We do live fairly comfortably (do a few social things, one abroad holiday a year & a couple of mini breaks), but we don’t have as much spare as you might think. And that mortgage seems a lot. We also bought a bit later in life and I just find it all a bit depressing as we still have quite a lot of our mortgage left to pay. It feels a bit like a noose around our necks and probably means neither one of us can cut our hours or anything any time soon. It sounds like you can afford it but my only flag is that our mortgage is half of yours and even though our income is the same, I certainly don’t feel at all comfortable financially. We’re fine but not comfortable. It’s just a lot of money to commit to coming out every month. I’m not saying don’t do it, but just be aware that that’s a lot to go out just on a mortgage

Another vote for the house 100%

I'd buy the house. It's so much easier with small kids if you have a garden and you can always downsize if you need to later in life. Plus the flat isn't that much cheaper for you.

How many years will your mortgage be?

Very little difference there, I’d go for the house, every time.

Literally everyone who I know who moved out of London for bigger houses find themselves working in London most of the time these days. So if the commuting costs were for hybrid working, I’d rerun the numbers with a 4 of 5 days in the office.

Personally I’d stay in London because as your kids get older everything is cheaper: free travel on the buses, highly subsidised tube, free museums, parks and events. The free/cheap transport opens up options to some of the best schools in the country, especially at 6th form. They can also commute to top universities and stay at home if they want at 18.

Think schools

I'd get the house

I'd also try and overpay on the mortgage if you can. When we were still paying ours I was obsessed with the MSE mortgage overpayment calculator 😳every month I'd be on there fiddling with the figures to see how much shorter the mortgage term was going to be. Every time either of us got a pay rise, half of it went to the mortgage. Even a few quid extra a month makes a surprising difference

I'm team stretch yourself, after spending covid in a tiny house with 4 of us! We wanted to be sensible but it cost us in the long run, ultimately you don't have to stay and pay off what you buy now. You can buy a good sized family home now with a long mortgage term, and when your kids have moved on if your financial situation hasn't improved, worst case, you can downsize the house and mortgage. But in my experience at least, wages go up (promotions and inflation) and when interest rates are behaving, your mortgage reduces comparatively to your income but you're still paying off a large asset, so it'll pay in future too. Property is worth a risk, although I say that as someone who still bought with a certain level of lifestyle in mind, I wouldn't stretch myself to the point of no holidays etc.

If it was between two houses or a massive difference in monthly payments I'd say go cheaper BUT I think there is potentially a big lifestyle difference between a flat and a house and payments not hugely different

Definitely the house.

I'd go for the house and focus on increasing income via job moves.

I also agree the size of that mortgage is brutal.

So maximum difference is £600 a month? And your childcare costs will go down further? ( they will eventually be zero)

get the house! but perhaps get a fixed rate for as long as possible? It won’t be cheapest mortgage, but would give you the security of fixing your costs.

sounds like you’ll grow out of the flat quickly. And the cost of moving is horrendous. It’s also safer option if prices go down in medium term- because if it’s your ‘forever home’ then house prices are meaningless really- you’re never going to sell.