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Original poster

Location, location, location or finance, finance, finance? Help me decide.

47 replies

KirstyAndPhil · 15/10/2010 14:03

Our house is under offer and we have viewed two very different houses which we are considering offering on. I am in a real quandry deciding between them so I thought I would see if the wisdom of mumsnet can break my mental deadlock.

The first house is uber expensive but gorgeous. The owner may accept our offer on Monday. It it in one of the nicest streets in our neighbourhood. It is next to our local park and right by DC1's school and all our local friends are within 5 mins walk. It is 3 mins from the Tube which we use to commute each day. It has wow factor but is tired and needs work. To buy it we would need a mortgage that is nearly 5x our combined salaries . We could get that mortgage but the repayments would nearly cripple us. I would work full time, we would not have holidays, we would have to watch every penny. Our lifestyle would really change. But we would be surrounded by friends and the park and transport links and we would have a lovely home.

The second house is in a much less nice neighbourhood about 20 mins walk from here. The house has less of a wow factor and is slightly smaller but it is also lovely. We could move in and do no work at all. We would not even require a mortgage to buy it so it our lifestyle would be unchanged and I could go down to 3 days a week at work. However, it is 20 mins walk from the park, 25 mins walk from most of our friends, 25 mins walk from the school and a bus ride away from the Tube. I love the fact that in our current neighbourhood I pop into friends houses and meet them in the street. Kids call for DC1 on the way to school each day. That would all be lost. The street it is in is quite nice and is full of family homes but the neighbourhood is much less nice.

I am so indecisive at the best of times and this choice is such a hard one. I know I am very fortunate to have such choices so I am not feeling at all sorry for myself, I just want to get this right. What would you do faced with a similar decision?

OP posts:

ASecretLemonadeDrinker · 15/10/2010 14:05

is it a forever/long term home?? If so, no.1. A mortgage will be paid off one day and you will be glad of the short term sacrifice IMHO

Original poster

KirstyAndPhil · 15/10/2010 14:07

It is meant to be a forever home yes. Its true mortgages reduce over time but this would be one heck of a mortgage. And DH and I work in the public sector so our pay is frozen for the forseeable future.

OP posts:

cat64 · 15/10/2010 14:11

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cat64 · 15/10/2010 14:12

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Original poster

KirstyAndPhil · 15/10/2010 14:15

Thanks Cat. Strangely there aren't many houses that fall between these choices. We are looking for a four bed with a garden and they are very scarce around here. The four beds with gardens in this exact neighbourhood are the price of house number one, and the four beds with gardens slightly further our are the price of house number two. There is also very, very little on the market at the mo.

You make a good point about interest rates. We would take a five year fixed rate mortgage to ensure some predictability.

OP posts:

kitsmummy · 15/10/2010 14:18

Well I wouldn't go for number 2. There must be a compromise somewhere in better location, more convenience, but not a 5x joint income salary? A half way house maybe? I'm all for stretching yourself and buying the fab house but I think 5 x joint, full time salaries is too much.

WideWebWitch · 15/10/2010 14:19

I think it also depends on

a) how old you are and how long you want to or expect to work for

b) how much you love or hate your work - if you love it and want to carry on and don't expect to want a get out then go for house 1

and what the 2 will be like when your children are older.

Tbh it sounds as if you want something in between: needs some work but you aren't financially crippled by paying for it / good location /gives you options.

shandydrinker · 15/10/2010 14:20

No.2 every single time. Mortgage free, part time job, stressless living. If they are good friends they will walk 20 mins to see you and anyway you will bump into everyone in the park. More exercise too!

WideWebWitch · 15/10/2010 14:21

I am cautious-ish though and my ideal is having a house we can do on one salary (either one of ours will do). Could you do it if one of you loses your job? Given current economic climate etc I think I'd be concerned about 5 x 2 public sector salaries.

narmada · 15/10/2010 14:24

There is no way on earth I would take a mortgage out for 5x joint salary. It's a huge amount. Who on earth is offering such large mortgages in the current economic climate??

It's a horrible thought (cheery soul that I am) but what happens if one of you is unable to work through illness or having to take on extra caring responsibilities?

I think I would definitely hold out for a compromise property, and maybe even consider renting for a while if you wanted to get your own current place sold. Hassle with kids, but still...

Original poster

KirstyAndPhil · 15/10/2010 14:27

Good points. We are pretty certain our jobs are secure although our salaries are frozen and that may continue for a long time. I am in my early thirties and DH is in his late thirties. We both like our jobs but I had been thinking I would like to go down to three days a week for a few years while our DCs are still young.

The other factor is that where we live in London the state secondary schools are pretty dire. Our DCs go to a lovely state primary but if we buy house 1 and our salaries remain frozen we might not be able to afford a private secondary for them. However, house 1 is in the priority catchment area of a shiny new academy that looks very promising. So that could be our back-up.

If only there were a compromise house.

OP posts:

Gentleness · 15/10/2010 14:28

20mins is no time at all, and in a family street you will make new friends. See it as branching out?

That big a mortgage however is going to be a real chain around your neck... For me, I couldn't put us under that amount of pressure.

Original poster

KirstyAndPhil · 15/10/2010 14:29

Narmada - we are able to secure such a mortgage because we have a significant down payment. You can get pretty much any multiple of your salary if your down payment is more than 60% of the price of the house.

The carer prospect is a grim one but I suppose worst case scenarios have to be considered. If one of the DCs were to get seriously ill, or DH were to be incapacitated, I would be up sh*t creek wouldn't I?

OP posts:

tattycoram · 15/10/2010 14:30

It really depends on your attitude to risk. Personally I wouldn't take a mortgage at 5x your joint salary at the moment. I also couldn't bear not having any flexibility re working hours, holidays and so on.

It sounds to me as if your heart is really saying you want the first house though, in which case you should probably go for it

WhatTheWhat · 15/10/2010 14:36

As a small point to note, the prevailing wisdom says that the BOE will not raise interest rates for at least 2 more years, so a tracker might be a good plan, switching to fixed in 18 months to 2 years.

We were in your situation and we went for the 'stretch' house and it was horribly hard for several years, but then promotions etc made it easier and we're now very glad we did not go for the easer option. In fact we could not buy our current house now due to mortgage changes and house price rises. However, we did have a period of time of no holidays, rubbish car, worrying abot the mortgage and it was not fun. We were 'only' 4 times joint salary.

narmada · 15/10/2010 14:43

whatTheWhat....But what if by the time for the switch to a fixed rate comes, interest rates are on an upward trend and banks are withdrawing their longer-term fixed rate deals, or making them less attractive?

Also, as I understand it, while tracker deals by their nature partially reflect the BoE interest rate, fixed rate and other deals do not necessarily - they will reflect the cost of banks' lending to each other. There can be large disparities between this, the LIBOR rate,(which many mortgages are priced off) and the BoE interest rate.

Original poster

KirstyAndPhil · 15/10/2010 14:55

It seems that so far the prevailing opinion is very much in favour of house two. Which is sensible of course. I am not a big risk taker so I have no idea why I am so seriously contemplating house 1. There is just something about it I can't let go of...

OP posts:

AllTalkAndNoAction · 15/10/2010 15:03

From experience I would say go for the more expensive one if you think you can manage it. Compromising too much means you will be wanting to move again as soon as you feel more financially comfortable, but moving again and again to get where you want to be is in itself very expensive - and draining! And you are at the mercy of fluctuating markets, and paying out endless stamp duty.

If the more expensive house is one that will see you through many many years, (in terms of size and location) you will be better off in the long run, even if the first couple of years are tough.

We have loads of friends who appeared to be biting off a bit more than they could chew, 10-20 years ago, when we were picking fairly modest homes - but we kept moving up the ladder every few years, and they stayed put. The result is they've got tiny mortgages and tons of equity on very desirable homes, nd whereas we still have a massive mortgage and less than 50% equity!

mylovelymonster · 15/10/2010 15:06

Have there been any other offers on house no1? Are you in a strong position as buyers (no chain, or short chain ready to go, finances in place - mortgage agreed - etc??
If so, make a lower offer based on what you are comfortable with. At least 10% away from asking price - maybe more, if your position is very good.
What is vendors position? Happy to wait for more or motivated to move? How long has it been on the market? What budget do you reckon you will need to do it up?
More info please!!!!!!

Personally, I think you should go for no1, on your terms of course. It is the house you want, after all, but don't overstretch yourselves. Rates can only go up. How can you borrow 5X combined salaries? Through a broker? Watch out - lending is incredibly tough now. Get a mortgage offer in place first then you will know exactly how far you can go, and be in a much stronger position with regards to making an offer which suits you. If it doesn't work out, you have other options.

Wishing you best of luck.

Mooos · 15/10/2010 15:08

I think you must be related to your daft namesake if you even have to ask this question .

artyjools · 15/10/2010 15:59

I'm with Mooos. I am totally baffled as to how you can be asking this question too, I'm afraid. I have family members who work in the public sector and they are pretty worried about job cuts. What will happen if one (or both) of you loses your job?

Also, are you sure you can get 5X joint salary? I had a meeting with a mortgage broker last week. We have a large deposit, will require less than 3x my husband's salary and I work part time but could work more, if need be. The broker said that she didn't think we would have a problem, but that it was hard to get mortgages.

IMO, there is stretching yourself and taking a reasonable risk, and there is being foolhardy. In the early 1990s, the interest rate went up to 15%. I'm not suggesting it will get to those rates again, but even a fairly modest rise could put you in queer street.

Why not hold out a bit longer and wait for something in between the two houses?

violethill · 15/10/2010 17:18

The working full time wouldn't bother me, but having to scrimp and save and watch every single penny would kill me. We did it when the children were little and in nursery and no way would I go back to that out of choice. To worry that we couldn't have a meal out, or cinema trip... it's no life. Also a mortgage 5 x salaries would worry me sick.

I would keep looking - there has to be something in between the two extremes of no mortgage and one 5 times your income surely?!

bodycolder · 15/10/2010 17:21

2nd

tanmu82 · 15/10/2010 17:39

Sorry but I'm another one siding with house 2. I think it is absolute madness to stretch yourselves in this current climate, and you really never know what is around the corner....what if you or DH took ill or were unable to work? what if one or both of you lost your job? Life is full of curve balls so knowingly putting this kind of pressure on yourselves seems mental.

I would much prefer to be mortgage free, be able to work less and spend more time with the kids whilst they are still young, and go on family holidays. These are the things that make for memories.....not a beautiful house that the parents are too busy and stressed working to pay for to enjoy life or the children......

You have to decide what's more important to you both deep down....

bodycolder · 15/10/2010 17:43

I agree with you! I know several people atm in stunning houses but financially screwed.The days of a house as an investment are about to end you cannot guarantee that it won't fall in value over the next few years and you will be sitting on a falling asset with no spare money for the nice things in life.memories are not made of big houses but time and if you can afford that you are truly rich.I have one friend who is really in it as her dh lost his dead cert job and the dream home is now a millstone which they can't afford to sell.

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