WWYD? First time buyers, large deposit.

[OTTMummA]

DH and I have inherited 180K
We have debts of 14K and need to put about 6K aside for all the costs involved in buying and moving so will end up with a maximum of 160K after this is all accounted for.

We could buy a doer upper for around that amount but would have to save to do the fixing and with 2 small DC it would be a bit of an ordeal but not undoable.

DH wants to get the maximum mortgage of around 100K the thought of this fills me with dread and although the houses in that price range are lovely I am worried about interest rates rising and being left with little to no wiggle room on outgoings and not being able to save any money.

I think we should go for a very small mortgage of around 30-40K and try to find somewhere that has room for improvement, corner plot or room for extending in the future.
This means that we will be able to save money and have a bit more spare income to do nice things with the DC where as we are really living on a tight budget atm.

But now I am wondering if we should ride this next few yrs out and hope for a property crash ( horrible I know, purely selfish ) so we could buy a larger property at lesser cost, get the most for out money etc.

So, wwyd? any tips or advice if you have been in a similar situation would be gratefully accepted.

TIA

Well personally I'd buy now as prices are low now, and there is no indication property prices will crash in a few years. (Where did you get that idea from?)

I'd also be tempted to get the higher mortgage now, but make sure you buy somewhere you can add some value to. Interest rates will be low for a while yet, and the amount you owe goes down each month (by a tiny amount, but still), and salaries while they may not go up much, they won't decrease.

Small dcs don't want or need nice things that cost money - that's the joy of littlies - they're happy with cheap or free cos they don;t know any better! When they're teens you'll be more likely to want more expensive holidays and stuff.

I'd be looking at properties just over the £250k mark, with a view to offerieng £250k as a max as that's the stamp duty limit. That should still give you a bit of wiggle room.

I think it depends on your current income, job security and house prices in your area.

We had a large deposit as FTBs but as we're in London we still needed a mortgage of 3.5x household income. We felt comfortable with this as our jobs are secure, and it allowed us enough disposable income to be comfortable. We could have bought somewhere outright with the amount of our deposit, or had a much smaller mortgage, but it would be in a less convenient area for commuting (we're very central and next to a tube).

Personally neither of us wanted to rely on a doer upper due to the time and stress - I know plenty who have done well out of it, but it's not for us. I definitely wouldn't want to do it with small dc around!

Prices are climbing rapidly where we are (though London is a bubble) but I wouldn't be hoping and waiting for a crash - if prices do rise you may well end up priced out of the area. And I expect you will want to settle somewhere with your dc and think about school places etc.

I wouldn't wait for a property crash, that may or may not happen.

Have you worked out your outgoings down to the last penny? If so, you can see what you would have left for savings and mortgage repayments.

If 100k mortgage means you can't save, then it would not be a good idea.

What is FTB?

I don't think there's any point in waiting for a crash. Why waste 'dead' money on rent in the meantime?

Personally, I'd do what you suggest, ie to get a 40k mortgage, assuming you can find something in the right area etc for 200k. I don't like the idea of putting all of one's money into a mortgage - I'd rather have a bit of money spare each month to save.

My personal view is that 100k mortgage is quite small, but of course it really depends on your monthly income and outgoings. I believe the rule of thumb is for your mortgage to never be more than 40% of your total post tax income. I found money saving expert quite helpful when we were deciding how big a mortgage to get versus keeping savings, this page might be useful.

It's a lot of money to inherit and I would feel a bit overwhelmed with the choice, so I don't blame you for being cautious. It is worth keeping savings, and certainly having money to spend on doing nice things! We have gone for a slightly cheaper house and then spent some money on a camper van, for example, as we knew this would improve our quality of life. But I wouldn't bank on a property crash, or interest rates going through the roof. I guess if it were me, I'd go for something that was a little stretch and that we could improve/grow into. Moving costs are so high and such a waste of money, so I guess the aim is to move as infrequently as possible.

You sound like you are very cautious and there is nothing wrong with this at all.

Pay off your debts first. Thats the priority.

Like others say above, awaiting a property crash is daft really. Who knows when and where it might happen. Places in my area are starting to rise again quite significantly too.

With such a percentage of equity in your mortgage application you would be in a very good position. assuming you are young, if I were you I would stretch your arm a little. If you feel 100K is too much and 40K too safe why not look at a compromise of say 70K. Definitely look at houses above the £250 mark, some of them could have been on for years and desperate for a sale. You never know

It really depends what you can get for your money in your area. If getting a larger mortgage but being able to stay put for many years to come is the outcome of that, I'd be tempted to do that. Houses with potential but not needing outlay to start with are pretty rare in my experience.

I'd go for the £100k mortgage. Say your repayments are £600. Well, in 10 years time that £600 will be less of your monthly income due to inflation.

Have you looked at what your monthly repayments would be? If you got a 90K mortgage you would still have a LTV (loan to value) ratio of 36% and will be able to get a good mortgage rate (if you buy something above £250K you need to pay 3% stamp duty so if you can it would be good to stay under that limit). Best 5 year rate I can find on a quick look is 3.09% with NatWest.

If you play around with this calculator you can see how much that works out at each month for different mortgage terms. It's £625 for 15 years or £431 for 25 years. It will show you how much you will owe at the end of the time as well.
Obviously you shouldn't take on more debt than you're comfortable with but I really wish we had stretched ourselves a bit more when we bought our first house. We're in an area where house prices only dipped slightly though and there is a big demand.
You're other option would be to use half the money for the deposit if you're income allows that and use the other half to renovate a project. Good luck whatever you choose.

Yes I have been looking at repayment calculators on Nationwide and with a 95k loan we would still have £300-500 for savings each month.

I grew up dirt poor and quite often had to go without food and what I now would call essentials so I am always very anxious when it comes to money and I just want to take as less of a risk as possible IYKWIM?

A property of 240-250k will give more space, probably a 4 bed instead of 3 and a drive way/garage so I can see the benefits, it is just hard to get over the anxiety of how much money is involved, although I know its not a lot to some, it is an enormous amount to me.
I am finding it quite overwhelming.

Whatever house we buy we will be there for a long time, probably until the children are in their teens.

If we bought a house at 250K with a 95-100k mortgage and there was a crash would if affect us severely?

you would need property prices to crash by over 100% before it would impact you, because all other house prices would have crashed as well.

the bank of england have said interest rate will not increase for a number of years.

the one way to protect yourself from a crash is loacation, location, location!

So you can afford a 4 bed house, with a £95k loan, 70% equity AND still save £300 - £500 per month?!!!!!!! It's a no-brainer!!!! With that amount of savings you're laughing!

If you can get a house you actually want without stretching yourself, and that'll make you happier and less anxious, go for it.

If you can't really, but that extra 100k will make the difference to getting you a place that will deliver what you are looking for, I'd go for that option because it sounds as though your feelings are based on anxiety rather than realistic concerns - so prob best to work on calming your anxiety (I really do sympathise btw).

As a Londoner I am perhaps more used to debt though - you generally have two choices, get FAR higher mortgage debt than 100k, or remain hostage to an even more aggressive and unpredictable rental market, so I am perhaps more used to the idea of a massive mortgage.

I wouldn't hope for a property crash. Houses in our village that aren't new builds are selling for the first time in years.

I understand your feelings, OTTMummA. We went from a one bed flat with no garden to a 3 bed semi with a garage/garden. It took a lot to get over feeling that it was too big a much commitment, and too extravagant a purchase, but we can afford it and I am so happy we did it. As an aside, we bought our flat when the market was really booming and we still managed to turn a good profit when we sold last year. There are still good purchases to be had - location, room for extending/improving.

Interest rates aren't going anywhere for some time (Mark Carney was just talking about it on R4 this morning), but it sounds like you can comfortably afford 250k, even in a scenario where interest rates were 8+ %

Elizabeth's idea of overpaying on your mortgage is good - some lenders allow unlimited overpayments (First Direct for eg), so you could continue saving and pay off lump sums as and when it suits you. Money Saving Expert has an overpayment calculator here

I would just add that it might be worth looking at offset mortgages if you are planning substantial savings each month (which it sounds like you are). And as everyone else has said there is nothing wrong in being cautious (or prudent as I like to think!). Might be worth talking to a professional - get a personal recommendation as they vary a lot. It sounds like it is important to know that you are financially secure - so it would be worth looking at your overall financial planning (pension/life insurance etc) not just mortgage. Good luck.

Do you currently rent ? If you do, what mortgage would you get for the same amount of rent ? Maybe that's more your comfort thing - go with an amount you want to pay a month.

We pay £895 a month on a 3 bed but we are on a seriously tight budget since I've gone back part time after maternity leave.
We could get a mortgage of 125K but I won't consider that as we will be scraping by.
Out of the 3-500 left over we have to start some sort of pension going, I have one with work but I am not paying in a lot.
We have life insurance but will need to pay for house and contents which I'm not sure what the figure will be.
It would be nice to have some disposable income each month for day trips and save for a holiday/put some away.

I've talked to DH this evening, he understands my concerns but he is quite level headed and is often more cautious than me (hard to believe right) so we have agreed to go no higher than 250k with 100K mortgage being our limit.
He said it would be good to keep aside 10k for any surprise expenses instead of maxing out the credit card which I agree with.
I feel happier now we have a definate limit, although i will probably try and haggle as much as I can.
Now we have to decide what we definatley want in a home and what is negotiable.
Argh decisions! Do any of you want to pick me us a house il just take a nap whilst it gets sorted.

If you are a FTB in a strong position then look for a bargain. Some houses are selling in days here (SE, posh market town), but the house we are buying has been on the market for nearly two years so we got it for a good price (or will have it soon hopefully!). You can search on Zoopla by time it has been on the market so you know who is more likely to take a lower offer. And do your research - some local estate agents here encourage people to put houses on stupidly high and then pressure them later to take low offers. So check sold prices - sale prices are not a good guide of what property is actually going for.

Makes sense to go no higher than £250 because of stamp duty.

An offset mortgage might make you feel more comfortable as well. You could put away an amount into a savings pot that's offset and while you'll get no interest on it, you will reduce the interest you are paying on your mortgage. For me I didn't want to give up the rainy day/emergency money pot to pay off some of our mortgage. Offsetting it was a good middle ground for me at least. I was a squirrel in a previous life.

House prices peaked in 2007. They have been low for the last 5 years. House prices are now back to 2007 levels here and are expected to rise steadily. Although who knows!?

In your shoes I'd buy a lovely house between 190 and 220. 60 is still a tiny mortgage. However if your income is tiny or unreliable, maybe you should get something worth 190? I'd make sure the plot was big enough so that you could build an extension in 10 years or so.

Actually id rather but a do-er upper for 220. That way you can have the lay out and decor your way. One that had space to extend and could bring you a little income. Not an option if time poor.