Should you buy the most expensive house you can afford?

[Celia1978]

Interested in other people's opinions. Moving house in London. We are fortunate to have a decent budget - but we want a family home: 3+ beds, garden, school catchment etc so are priced out of many areas. After a bit of research I've decided on an area I like that ticks many boxes but DH isn't sure on the basis that the houses aren't expensive enough! His thought is you should get the biggest mortgage you can (within reason - we're not talking about going beyond a limit where we'd be confident of making repayments) because it gets you into a better position for your next move.
Just wondered what others thought. I quite like the idea of a small mortgage - but I can see his point too!

The bubble will burst again, even in London. Be cautious.

Well, if you assume that house prices will keep rising exponentially and interest rates won't rise, and you know that you won't suffer a loss in income, and that you will want to move up the market in the future, then of course you should.

However, if you accept the possibility that they might fall, or interest rates might rise, or something might go wrong in your life which may lead you to need to reduce your outgoings, then having a comfortable mortgage would make a lot of sense.

In London I would.

Dame is right. Your DH was right on pre-financial crisis thinking (ie real estate always increases in value), but the wrong area or an over-priced area/house can leave you in trouble. But in London in a decent area you're probably safer.

We did in last house. Bought for 285k in 2003 in london which I thought was an outrageous amount it really stressed me out. Dh parents horrified at the vast sum. Sold it two years later for 475k...

Base buying a house on the proviso that interest rates might rise and therefore you can still comfortably make the monthly repayments if there is say a 2-3% rise. I would never completely max myself out. If the top of my budget was 750k I go for something around the 650 - 700 mark

No he is wrong. Interest rates will rise probably as soon as next year and the biggest mortgage you can afford now - you may now be able to afford it later. Also - just because the house is pricier doesn't mean it will appreciate faster than a cheaper one (in fact often the opposite) so I don't see how it would put you in a better position for the next move

We did this. Way too stressful, lifestyle-wise. No holidays, no renos, no expensive outings. It's a vulgar competition here (North America)...how BIG can you go. We sold our house, made a tidy profit and moved into a serviced apartment because DH got a job offer overseas. One week before we were due to go, we had a change of heart. Our bank has told us we can buy a MILLION dollar home (on one very good income, but still...Hahahahahaha). We've purchased one that costs $650,000 and booked our first beach holiday in years .

No! I don't know why people do this. If you can find what you want at a lower cost, why would you stretch yourself?

It would be lovely to have a sense of financial security, surely?

I've only been made redundant once, laid off once, worked for a company that went bankrupt once, and when in business on my own, only been unable to work for a year after an injury once.

So if I'd had huge mortgages, I would only have been repossessed four times.

Your luck may vary.

We have never been comfortable with maxing out our mortgage - even less so now that we are in our forties and aiming to pay it down/off before the dc hit uni. Looking back, we might have been able to take more of a risk in our late twenties/early thirties pre children. We even contemplated investing in btl flats but dh bought a sports car and we went on long haul diving holidays instead! It's all about your appetite for risk - it's no fun to be frugal for years just because you've tapped out your savings on a house. Our house renovations went over budget but we didn't want to extend our mortgage so we opted for interest free credit cards/loans instead. However, we still have to be disciplined in paying it back within that period so frugality have reigned in the last 2 years. We have experienced redundancy twice in the last decade so we prioritise building a financial cushion when we can. Saying that, you can always sell a house to release equity but that's easier said than done - my bil is self employed and is experiencing an income trough atm. It is hard at times to be empathetic when he is claiming poverty and living in a million pound asset!

Hmm - seem to have started two threads with the same question. Sorry about that. But anyway, thank you all for very interesting responses - interestingly, this thread is much more anti-stretching than the other one!
I think I basically agree that the future is so unknown in so many ways that why push yourself right to the brink?
Myron I think you've hit the nail on the head - we're still thinking with 20s/30s heads on where you're both going to be in full time work with few other responsibilities, so why not have a big mortgage? But we're now already paying one lot of childcare, with hopefully another baby to come, plus who knows what else - I might decide to be a SAHM, one of us might opt for a career change or whatever - so reducing the percentage of our income that goes on a mortgage seems like good sense to me.