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!

Can I add no 5. To your list?
Allowing for interest rate rises ( I remember the days of 14%).

Oh yeah, I've been lulled into a false sense of security re low interest rates. Thanks creamy

Interest rates, interest rates, interest rates.

Unless you are going for a 10yr fix, you must be budgeting for rates of ~6% (BoE base rate of ~3-4% + ~2-3% bank loan margin) as a sensible minimum. Anyone sensible taking on a mortgage >5yrs duration would be allowing for them being higher than that at some point.

Do not fall into the trap of saying "if rates go high then we'll sell". Clearly if rates go high then the value of your property will fall.

Just don't buy in Forest gate !!!!
How about chingford?

This all assumes that house prices are going to continue to rise - and I'm not so sure about that...
I would go for the smallest mortgage you can and then if you have extra money pay off extra each month...aim to pay it off asap. The bigger your mortgage the more you are going to give the banks in interest...
If property increases in price your equity will go up but so will the prices of what you want to buy so you will 'make money' but still will need somewhere to live...
Imagine having no mortgage/rent to pay...aim for that...

I agree that there could be a property bubble going on as people rush to buy houses because the prices are going up so more people get sucked in to some kind of frenzy. I think buy the best house you can afford without bankrupting yourself but try not to overpay. Look and see what similar houses were going for a year or two ago.

Interest rates will rise in the longer term although remember the Government has more debt than it has ever had in its entire history and pays interest on that debt (as much per year as the cost of the NHS I believe) so it is not exactly going to be rushing to raise rates. I have been lucky enough to use the last few years to pay off debt whenever I can even though rates are low (at one stage we were paying 12% interest a long time ago which was not fun).

If you get the most expensive house you can afford and a mortgage to match will you be able to afford to still pay the mortgage if interest rates go up as they did in the early nineties when millions had their homes repossessed as they couldn't afford payments. It was very sad.

Do you want a doer-upper in a more expensive area or a fully finished place in an up and coming area? Are you planning to sell up and move out of London in the future? Kirsty and Phil would say location wins out, but you need to think of quality of life too.

Those areas that you are looking in are good. with Cross rail coming, tge value will only go up. Speak to those who bought alobg the east London line before it opened and how much more their property values have rocketed! Don't underestimate the power of having a new transport hub on your patch. good luck

as long as you can afford the bigger mortgage - I'd go for the better/more expensive location each time.