Stretch for forever home or accept moving?

[Maybeforeverhome]

We have a combined net income of circa £10,000 pcm. We’re in our thirties, DH isn’t a FTB but I am and we’re currently renting. Our rent is £2200 pcm.

We’re currently TTC which means my income is likely to fall but DHs will increase over the next few years (for unrelated reasons) so it should balance out but it will mean more expense/outgoings.

We can buy a house for £750k with a 15% deposit and mortgage payments will be circa £3500 pcm. We will likely outgrow this house in 5 years. This means the expense of moving but also the stress and difficultly in trying to find a “forever home” in that area.

Alternatively we can buy a house for £950,000 with a 15% deposit, which would mean maxing out our savings. Mortgage payments will be circa
£4300. This would likely be our forever home.

Bills in both houses will be expensive due to poor EPCs.

What would you do?

Frankly, both are too much.

We have a similar monthly income (£9.5k) and our mortgage is £2.7k. We live comfortably, manage to save and go on holidays etc. I feel with a much higher mortgage we could afford it but we would be much less comfortable. How much do you have left over each month at the moment? You would also need to consider nursery fees in the future too.
I'm usually one to say stretch yourself and we did when the rates were lower but I'd feel uncomfortable at the level you're suggesting.
It's expensive and a lot of hassle to move twice. Are you already stretching the mortgage term as far as you can?

I mean stretching the term

@Maybeforeverhome if you can afford a 15% deposit on the 950k house why can’t you put down more on the cheaper house?
How much are you managing to save each month at the moment?
Do you think you might have two children in full time nursery over the next 5 years and have you factored this in? Might make the £750k a better option.

It works out at just under 19% as a deposit on the cheaper house which doesn’t bring the interest rate or monthly payment down so we might as well hold onto some savings if we buy the cheaper house.

I think I’d save for another year or two. What other expenses do you have? It should be possible to save 5-6k a month after rent at the moment which would be 0.5% more deposit towards the forever home each month. A year of saving at that pace get you a 20% deposit.

The more expensive house is too much of a stretch in your circumstances. Putting yourself in a position of ttc with no or limited savings and a big mortgage would be very high risk imo. Definitely the 750k home.

You might get a better rate at 20% though which you should be able to get to pretty easily

Thanks, this is helpful. This is based on a 30 year mortgage. I’m not sure what the maximum is though and haven’t looked at a longer term so will consider that.

We need to sit down and go through bank statements to figure out how much we’re saving each month. It varies a lot month to month and DH income also fluctuates but this is the minimum monthly take home from his base pay.

As I said in my OP we’d already be maxing out our savings in order to afford the deposit for the more expensive house which we’d prefer not to do but would consider to afford a forever home.

We don’t need to do that for the cheaper house because the monthly payments feel affordable to us based on the 15% deposit.

You'd still have almost 6k per month after mortgage payments at current salaries so I think it's doable. What % of the current 10k a month comes from your husband's salary? Is it still comfortably affordable while you're on Mat leave, for eg?

I'd try to avoid the double move if I were you, moving is so expensive. Yes in an ideal world rent a little longer and save as much as possible beforehand.

The cost of moving house in that price bracket is phenomenal, so I'd try to only buy once if you can. Stamp duty, solicitors fees and estate agents fees really add up.

We want to move before having a baby as we’re in a small flat at the moment.

Also, in two years time we might have saved an extra £100k but that house will probably have gone up in value by the same amount!

It feels like an overstretch, our mortgage on about 9k is 2700 and that's a big chunk, and then with nursery fees on top plus commute and bills there's not lots left. I'd go for the 750k, unless it's two beds it should be a long ish term family home?

Well, have bought enough houses -and still keep them- to feel I can comment.

my last home was my forever home- on single income- as moving even within 5 years, never mind 2/3 years, is very costly. so I stretched to my max with 15% deposit (I agree with you, that adding a bit more on deposit to cheaper house doesn't move the monthly premium much, so best to keep your cash), then went over 1 mil.

I had savings worked out to last 5 years, but that only lasted 2 and half years. luckily I was expecting another release of funds so all worked out well. expensive houses are expensive to run with a lot of figures your modelling may underestimate. so be prepared for that and for the unexpected.

however, if you budget for 3400 mortgage, other costs about 400/500 so 4k. don't forget life insurance as you are 2 and ttc, so add another 200/400. so you will be left with 6k or 5.5k. nursery for 2 kids is about 2/3 grand. that's 2 or 3.5 k left.

your sal will go down a bit and his will go up a bit during ml. unless you both are well organised, I think the 950 is too much for you. why can't you stay in 750k home for over 6/7 years?

as a ftb, I would not advise you to stretch yourself too much. I only handled my situations as I wasn't a ftb- so I wasn't to naive to the unexpected.

Yes but the more you put in and the lower the rate you get, the better position you’ll be with your outstanding mortgage if you did go for the cheaper house and then sell in 5 years.
Which could mean you don’t have to stretch yourself now but still be in best position for next house.
Looks like decreasing your LTV would save you £300-400 a month with current rates, which you could overpay into your mortgage, which alongside the lower interest would be roughly equivalent to the stamp duty on your next home.
Worth costing your options fully to help you decide.

this!

when you breakdown numbers, even estimates, it is clear 950k is an overstretch. why I am worried op can't see this as she is a ftb and just concerned about future stressful move, costs of moving without realising she actually cannot afford the bigger house in the first place!

Your income barely needs to fall if you return to work after six months mat pay. Then factor full time nursery and if dh salary going up you will jointly be on enough to fund the house you want if that is most important thing for you and you prepared to maybe take cheaper holidays cheaper cars etc....buy your future child a second hand buggy not the 1000k system...if you want the house and the range rover and the ski holidays it might be very tight....there are lifestyle choices it is your decision.

For me the issue is the low deposit. Personally the idea of paying back so much more in interest now rates are higher is hugely off putting as it feels like such a waste of money.

Also, in two years time we might have saved an extra £100k but that house will probably have gone up in value by the same amount!

Im this economic climate that’s unlikely.

@cestlavielife exactly. hence I commented on caveat being if op and dh are organised and good with money... you cannot overstretch and still expect holidays etc etc as previously. you just cannot! it is one or the other! and I have been there with lots' of cash to spare, but even I knew it from the off!

Could you afford the second home and a couple of DC in nursery costing approximately 3k per month?

while I try not to touch 'economics' I too could bet on waiting 2 years. and I am of the school of thoughts of just buying whenever you are ready and don't consider markets. however, even if hp pick up in 1 year, you can still find a good price in 2 years provided you are prepared to look hard!

And what are you going to do about poor epc? Factor spending 10k or 20k on fixing that double glazing etc can be done on victoriana houses at a price

my double glazing on my forever home cost 15K and that was before inflation/ col. so make that 20K op.

these are the little expenditures that a first time buyer might not see/ expect, which I am trying to highlight for op. so, you need enough savings for the unexpected until you are settled in your home- 1 or 2 years after purchase.

Our monthly income is 8k and mortgage 1k- and I certainly don’t feel flush! I have a big old house and believe me it eats money- yes they are beautiful but if I was still paying school fees/ nursery costs I would be skint. 6k sounds a lot to live on a month after a mortgage but old house and kids will quickly go through it.