Help - I have no experience of all this malarkey

[HesterShaw]

So we're about to buy our first house at the ripe old ages of 38. No children, very unlikely to have them, but we do need space due to running our own business from home and we have pets. We can only do a 5% deposit for now, which is fine - we have had a mortgage approved. Just after some advice really. Given that we're now not entirely in our first flush of youth, would you go for a house which has lower repayments each month leaving you with more money to spend on other stuff, but maybe a house in a less naice location, with likely parking issues and traffic noise. And, let's be brutally honest, near lots of people who you might not have a lot in common with (please don't think badly of me for that comment - I have already lived in rough areas with noise and drink and drugs in my 20s). Or would you go for a house in a village which you already know you like, which costs a reasonable amount more, which would be a reasonable stretch. I say reasonable, because of course all things are relative. We could afford it now, but I hate to think what would happen if interest rate go berserk - I can just about remember my parents' white, sick faces every time the bank contacted them when rates went up to 15% back in 1990! I have asked lots of people about the likelihood of this happening, and the general consensus seems to be, it's not likely but not impossible. Basically this lovely house would be in the region of £820 pm. Our combined income is roughly fifty thousand.

I'm inclining to think it's worth it to have somewhere you look forward to coming home to at the end of the day.

As I said, I'm new to all this stuff.

I'd go for the second option. don't spend your money on somewhere you don't want to live. OK to rent but I wouldn't buy there

Personally I would go for the nicer area, as I've lived in the other type you're describing and spent the whole time wanting to move! If you end up doing that and paying for all the expences of moving again in a few years then that will be wasted money.

We have a combined income of about £50000 and payments are £950 per month. After my maternity leave our combined income will be about £40000 and we'll have a childcare to pay for too. So it can be done (although we'd stand no chance if rates went up to 15% - we couldn't afford those rates even on a 1 bed in bad area though).

Where we live is really important to us though, and we sacrafice by spending very little in other areas and having a lot less of a life than some would be happy with! You need to be comfortable with the monthly payements though, if you like lots of expensive holidays etc then a big mortgage might not be for you.

Oh no, we don't have expensive holidays often! Would like to but no. We live quite modestly, and don't want lots of "stuff".

Thank you for your replies by the way. Appreciate it :)

I'd go for the one in the nicer location that you like now. BUT I would budget for interest rates to go up. They just have to. This is unprecedented this low rate.
Have you sought independent advice about fixed rates etc?
I'd still have a savings account to squirrel money into every month to cover you over in the event.

The other thing we have thought of doing is over paying when we are earning lots of money. Our business does fluctuate from year to year but it's generally growing and we take a lot of money in the summer. Apparently you can overpay by 10% a year. This would reduce the overall amount wouldn't it? And then when the two year term is up, we can find another fixed rate period. But yes, putting money away as well would be wise of course.

Re the independent advice, yes we have meetings set up.

Are these particular houses or hypothetical ones? Can you find somewhere in the middle? Like a medium ish sort of area so your repayments won't be sky high if the rates do go up. For us it was a play off between house size and location. In the location we wanted we couldn't afford the size if house we needed, so we bought a house at the edge of a nice area, for things like schools purposes we see in a good area but at the edge so we bought a house that was the right size for our needs if u see what I mean! But then this probably isn't our forever house.....we are mid 20s and wanted to get on the ladder.... Really depends what your personal priorities are but I'd suggest a compromise.

We've fixed for 5 years, so we pay a bit more each month but at least know what we will be paying for a while, and will hopefully be earning a bit more when the 5 years are up (which should help to cover any rate increases.) Worth getting some financial advice on this though as many people don't think rates will go up for some years to come so you maybe better fixing for a shorter time and getting a lower interest rate. We can't afford to risk this, but if you can it might pay off.

Aquarius, oh yes, these are actual houses! These is very little in the middle to be honest. Round here it is almost all small, old damp cramped terraces, or very expensive "executive" homes. There are no new build estates at all. In fact this town has had 11 houses built in the last 4 years, or something. Whenever anything is suggested, the second homers shout NO!

Yes you can overpay, but it won't reduce the monthly payments due if / when the rates go up. At least not on my mortgage.
The overpayments go into a sort of separate offset account to reduce the amount of interest you owe which is obviously a good thing.
They don't reduce the capital you owe, until you've built up enough in the offset account to repay the capital amount.

And I'm overpaying on a tracker mortgage atm which aren't offered any more. My rate tracks the bank of England rate. The bank hates this, and keeps offering me a fixed rate as if I'd be mad enough to move. Don't forget the bank is out to make money.

Definitely the second one. Without a doubt.

Re the over paying - yes, to paying off a bit whenever you have the extra money, and even if you are locked in for a couple of years, you can still save it up and then pay off a bigger chunk as you come out of your 'lock in' - that's what we've been doing since the interest rates dropped to these ridiculously low levels.

Go for the nicer area, one you want to enjoy coming home every night, also the cost of moving is always so expensive, so best to get somewhere you can stay put and limit your moving costs. Buying a house on a compromise may mean you want to move in 3 or so years, and then you will burn up a good chunk of money that you just won't recoup.
We're in the same pickle, and hoping to have an offer accepting on monday on a beautiful house, although expecting a no, as we are offering well below the asking price - in our opinion it is massively over valued though so fingers crossed although I don't expect it will get accepted.

Squirted, yes they did make that bit clear. You won't reduce the payments over the fixed period of two years, but it will make a difference in the long run.

Thanks for the responses, ladies.

misshoohaa, well you never know. Good luck!

Hester I'd be inclined to wait a while. I wouldn't want property number one but property number two sounds good until you mention "reasonable stretch". I wouldn't be happy with that aspect. I don't think wages are going to go up much at all. I don't think house prices are either. I do think interest rates are though.

Go for the nice house in the nice location. Good Luck.

happy buying. interest rates will go up - that is as certain as death and taxes. budget for 6%, over pay now to that amount and then you wont get a shock when they grow to this level.

Thanks HerHonesty.

Carla, I'm trying to decide if I mean an actual reasonable stretch, or just me feeling a little out of my comfort zone. Having no children will make a difference, unless some miracle happens, as they're expensive little blighters. A few years ago we were paying £700 of loans per month, on top of rent and so on, and those loans have been cleared now. So that totalled £1300 per month before bills.

I will ask the mortgage advisors do do some calculations taking in 6% and see how different amounts come out. I don't think the amount will be too horrific. I'm just very nervous and cautious with money.

6% has been the average rate so that's a reasonable figure to budget with.There are numerous calculators that could help you work out the costs, try moneysavingexpert as they have an overpayment calculator as well.

I would buy a house I'm happier, especially if you know its for the longterm.We bought a house 3 years ago and I'm not happy, its too small and the area whilst nice doesn't suit me.It's miserable coming home from a long day at work as I don't feel able to relax.We may move but its so expensive and I just don't have the energy as prior to this we moved several times whilst renting.

Do also allow for some settling in expenses, a new house always seem to incur costs irrespective of the survey! Good luck with house buying

Oh my goodness, this might all be about to happen! Thanks for the advice ladies :)

What did you go for?

The nice one. Just waiting to see if they'll accept the offer. They rejected the first one :o

By the way, you CAN get tracker mortgages and mortgages where any overpayment is taken directly off the capital. It's not uncommon.

We have met a very nice man this evening, who was an independent broker. At the moment only Halifax and NatWest are doing Help to Buy, and while the Halifax rate is higher, NatWest are an arse to deal with. However, he has also found a couple of others which are very interesting, which are better deals. He was someone I trusted instantly - important.

He has also explained a lot about overpayment.