Advice please - To buy a bigger property, or not to buy a bigger property

[FussInBoots]

DH and I have found a dream property that ticks most of our boxes.
It just needs renovating, but a lick of paint here, some carpet or flooring there and I genuinely think it's good to go.
We could replace the 14year old boiler system, and the electrics, but both have been checked and both are okay.
Bathroom and kitchen are very outdated and will be changed when we could afford it
This property has an outbuilding where my husband would work his 2nd job from.
My question is, we live in a semi detached 3 bed that we completely renovated, we've maximised every square inch of the property to use for our family of 5s needs. (14,11,8)
Do we stay where we are, with a £230pcm mortgage which I'm overpaying at the moment at £400 extra pcm, husband is also paying an additional £300pcm for his studio.
Or, do we buy this outdated property, that is our dream size, with the additional outbuilding.
It would mean or mortgage payments would go up to £1300pcm and we'd be tied into a mortgage for 25years
Whereas with the current over payments on our current mortgage, we could be mortgage free in 8 years
We keep flitting from, you only live once, to, we love having disposable income and holidays.
The kids would absolutely love the new property once they've got they're rooms decorated.
We saw the dream house yesterday, and it was lovely, and looks like we're putting our house in the market tomorrow to be in a position to put an offer in.
Any and all advice welcome, sorry, I knownits a long post x

It sounds great, but you're clearly worried about the finances as would I be. We'll also be mortgage free at a similar time and we're on a 1.99% mortgage rate so it's hard to beat.

We looked at a new build recently and actually, I absolutely hated it 😂. On paper it was everything I wanted but in person it was all wrong. I'm always half looking at what's out there but I think the excess cost is just too much for us to balance and we don't even have kids.

Is there a compromise to be had? Any other houses? A shorter mortgage product? Any way to change up the LTV?

Yes, I am worried about if it's the right thing financially or not.
We do have 3.5 years worth of short term debt that will give us a lot of breathing room when cleared but we will still continue paying that with the higher mortgage if we go ahead with the purchase.
This is the first property that we have seen and thought... we could live there and make it our own and the outbuilding would free up the rental costs for DH and go towards our asset instead.
Hindsight is a wonderful thing, but I wish we had bought a bigger property for a higher price back 8-9 years ago when rates were so low and prices were no where near as high as they are now 🙈

What % of your combined net take home pay is the £1300? How secure are your jobs/sector you both work in.

If the payment is 25% or less of net income, jobs are reasonably secure with likely future promotions, and property is in a popular/desirable location I'd be tempted to go for it if your budget leaves headroom for savings/discretionary spending.

A good plan is to put away the difference between you current monthly commitments a new commitments (increased mortgage, council tax, heating, house insurance, 2-5k per year just on maintence). By the time any purchase goes through you've gotten used to the outgoings and will have built a nice emergency fund.

I did a similar scale increase and extension of mortgage term 7 years ago mid thirties and don't regret it as I'm steadily reducing the term with overpayments from bonuses or payrises and suspect we'll have it paid off in15-18 years instead of 25. I did under estimate how much work a larger house is and happily pay 150 a month for extra help cleaning and managing the garden.

It depends.

Do you have the extra £400 a month for the mortgage? You're on a very low rate at 1.6% and 2 years is nothing. What would your new mortgage look like at 5%? Can you still afford it at 7 or 8%? This is key.

I've said most of this on another thread about moving and taking on a bigger mortgage. We did it, I don't regret it, but I did underestimate how much it would cost.

Life insurance, house insurance, rates, electric all went up substantially. There was also the cost of new/more furniture and the actual cost of moving (stamp duty, solicitors and estate agent fees, removal vans). We got a thorough survey (also costed £££) and nothing substantial was flagged but we still had unexpected repairs cost us 8k we hasn't budgeted for in within the first 3 years.

We bought the big house, and don't regret it at all.
Our mortgage repayments are around 20% of our take home, but we are still on a low ish rate. It will go up soon, but we were prepared for that.
Our children are pre teens, and it's so lovely for them to have all their friends over with plenty of space to hang out. We have a space to be creative, to play music, play computer games, to read, a cosy area to watch TV.
I appreciate our house every day, and I don't mind the sacrifices (our holidays are not exotic, and our car is very old!).

UPDATE
We've put our house on the market this afternoon and withing 1 hour we have a viewing booked in for 6pm this evening.
I am in shock, but at the same time I'm excited for the opportunity to potentially buy the dream doer upper property.
I've worked it out, and our new mortgage would 26% of or total net pay... is this too high?

Congratulations :)

On paper it doesn't look too high, but to quote my previous post:

"Do you have the extra £400 a month for the mortgage? You're on a very low rate at 1.6% and 2 years is nothing. What would your new mortgage look like at 5%? Can you still afford it at 7 or 8%? This is key."

The economy is doing all sorts of strange things and interest rates have been fluctuating a lot more in the last few years than they had been in the years immediately before then. So I would need to know I could afford the mortgage at the higher rate before deciding whether or not it is affordable. You're low rate will be over before you know it and it needs to still be affordable in 2 years time.

Some tips as we bought a reno which we thought sounded just like yours but lot more needed doing, boiler same as yours died after 6 months. Cost 2.5k to replace, plus new pipes etc. The whole reno doing most ourselves cost at least 30k plus the driveway and extras. This was before building materials were so expensive, and it was a small 3 bed semi. Ao maybe double now. So they become a money pit, factor that into your costs.

Also, check about running businesses from the house, we didn't check amd our ex council forbade using house as business premises as does our new house. This will be in the deeds. Otherwise this would be a big unexpected cost.

We moved from a house paying £500 pm to one paying £1100 last year. Used to overpay but now can't. Do love the new house but miss the idea of paying the mortgage off so soon. Have started trying to overpay but it's harder. Our mortgage is less than 25% of income and it feels large especially as council tax, bills etc are high now plus we have 2 cars to keep. Would I make the move again, not 100% sure.

Thank you
I need to work the sums out based on 5%, 6% and 7% interest just to make sure.
Thanks for pointing that out

Worth considering the position of your pension. Lots of people use the time after paying off the mortgage to pay more into their pension. You would lose out on that opportunity.

It sounds like you can afford it and that the extra space would be invaluable in the coming years.
I think it's also important to have space for kids if they need to live with you into early adulthood, seems more and more common.

A little update for you guys...
We saw the house on the Tuesday, loved it! Yes it needs some modernising and possibly new heating system... but we've factored the cost of that.
We put our house on the market and it sold less than 24hrs later a little over the asking price!
We've had our offer accepted on the reno house... so now it's just a waiting game.
We'll be project managing the whole reco and only looking to get the trades in for things like electric, gas and other important jobs.
Where is the best place to gather advice from you very helpful people on reno and self build diy do uppers?
Thanks for all your input, on both sides.

Definitely worth doing.

• equity and investment
• day to day living
• why be mortgage free in 8 years, to enjoy life then? Enjoy it now. Having more space and a bigger garden now will improve your quality of life

Your current house sounds far too small. You will love the new one, and be so glad when you do eventually pay it off and have a much more valuable asset.

@FussInBoots that’s great news! Congratulations 🥳

Waah, I love it when a plan comes together like that! Congtrats @FussInBoots

UPDATE - oh dear!!
We got a level 3 survey done on the property, we knew there were some question marks over parts of the property.... but the extent of the issues are vast!
We're talking 65% of items are categorised as urgent, investigations required for urgent repair. The other 35% are all - be mindful, this will need to be looked and and updated / repaired in the near future etc.
We thought it would be a re-wire/new heating system and a new kitchen job with only cosmetic updates throughout the property.
But now there is talk of potential subsidence where the vendors have tried to patch things, there is horizontal cracks in the external render which appears to be due to disintegrated wall ties, which is thousands to repair.
This also doesn't even touch on the rotten roof beams which are full of fungi, the damp window reveals and internal walls, the cracked and unstable chimney stacks and possible asbestos in various parts of the building.
The list seems endless.
I'm in utter disbelief, we were nieve in thinking we could do everything ther tban gas and electric ourselves.

I suppose I'm just wanting your thoughts and opinions on this? Have you faced challenges like this and overcome them? Did they come at a small cost or a large cost?
I'm worried if we go ahead with the purchase we would be putting our financial security in jeopardy as we still don't fully understand all of the potential issues we may face whilst we fix the long list of issues that have already been identified.
I need the good, the bad and the ugly from you all please 🙏

Don’t do it

We are in the middle of a Reno. We have found damp and rot in addition to the usual re wire, plumbing and kitchen. It’s been insanely stressful

I wouldn’t be tied into a 25 mortgage at your age - you’d be paying it off when you’re 60 and 6). Better to pay your mortgage off early, and enjoy life.

Just seen the update. Sounds like the dream house has changed to a nightmare house.

Run

I couldn't agree with you more

We've just put the purchase on hold with the EA and the solicitors.
EA has asked for the copy of the survey... what should we do? Do we send it all in the hope to try to negotiate a better deal, weve also asked to see if the vendor would fix the issues before sale or do we send just a snip of the summary?

I think it would be fair to walk away at this point as it sounds like the issues are significant... 😬😬😬

I'd stay put.
Just read the update...I'd not just stay put, but run...