Stretch ourselves or more modest house?

[24again]

Are now in a position to buy our next house. Could afford up to £560.000ish but I've seen a really nice house for £380.000. Would it make more sense to stretch ourselves a bit now and buy a more expensive house with the idea that house prices are only going to rise?

I would guess that depends on amount of equity/size of mortgage and length of time until you retire ...

If you buy the cheaper one, are you going to be happy or looking to move within a couple of years?

Why is the cheaper one cheaper? Is it as nice as more expensive ones?

Maybe you could buy the cheaper one and buy a 2nd house as an investment, so you can make the most of the rising prices?

I wouldn't assume house prices are going to continue to rise (unless you are in London).

Interesting, we're in a similar quandary. We're looking at houses within around a £200k price band, wondering whether to go for the top of the budget or something more affordable. No decisions here yet though, so no help I'm afraid!

I would never bet on house prices rising. That way negative equity rises.

okay, so how stretched would you be? How much left over at end of the month? What happens if one of you loses their job?

*lies not rises... (why do I always ruin my best lines? Urk. ).

Depends on your mortgage, your income. At £560K it could be around £2500 repayments monthly. Month in, month out.

If the cheaper house ticks all your boxes in terms of size and location there's no reason to overextend yourselves.

You could consider buying a second rental property if you want to gamble on the property market. At leat it would do something towards paying for itself and you could sell one if it all went pear shaped.
If the cheaper house doesn't tick your boxes that's a different scenario.

What would the monthly mortgage repayments be and what would they be when interest rates eventually go up?

Don't forget, if it's a bigger house then it'll be more expensive to run and will be in higher council tax bracket. It's a balance of what do you need with what do you want and what you can actually afford!

If you like the cheaper house and it still suits all your requirements then I'd go for that one.
Taking the house and stretching yourself leaves you with absolutely no wiggle room should anything go wrong (god forbid but still, these things happen).

Agree with hogwash. I would always buy the more expensive one if I could afford it. You are then locking money away for the future rather than spending the extra money on fripperies (which is what I would end up doing).

If you buy the smaller house it would be a good idea to put the difference in mortgage payments into pensions/locked in savings etc or overpay the mortgage.

Or you could try remembering back to the early 1990s when it all went completely tits up and loads of people got caught in the negative equity trap...

In a similar situation and think have decided today to go for the slightly more expensive house which does tick the criteria, rather than the cheaper ones, which, if I'm honest, don't. I would rather cut back on everything else if need be for several years but have a house we can be at ease in, rather than spending what is already alot of money on something which doesn't meet current criteria. Am considering taking extra job to save now towards future interest rate rises.

Think about:
Interest rate rises
Redundancy
Having more children (whether planned or not)

You need to be in a financial position to manage changes to your lives, not just the status quo. It isn't a great to be spending everything you earn, if you can avoid it.

My MIL gave us the advice never to stretch too far, because she and her DH bought the most expensive house they could afford and then couldn't afford to do anything except service the mortgage. She seriously blames the stress and lack of money as a major factor in their divorce. DH and I could 'in theory' buy a house for £850k; we are in the process of buying one for £480. Our plan is the overpay the mortgage and then have the option to retire early

I would buy cheaper.

Save the difference if you must. The cheaper houses may not look as good because you've seen what you can get if you spend more. But if you stick to a lower budget then you will find what you need.

I would go for max 3.5 x salary. If you are big earners/high fliers, look around the office. How many people over 50 do you see? Not many, I would bet.

Thanks for all the replies. Yes, difficult choice. If we went for the more expensive option then all my wage when I went back to work in a few months would go on the mortgage but if we bought the more expensive house then we wouldn't have to move again. If we bought the cheaper house we'd be in a position to move to the expensive house comfortably in 8 years when a business loan is paid off and my wage would be my own.
All of the houses I now like are, surprise surprise more expensive as the cheaper one has gone under offer! We are in a position where we can wait a bit though as we are in a very nice rented house at the moment.

Personally I would go for the cheaper option but I remember my parents being locked into a huge mortgage with high interest rates in the 80s. We had no money growing up because everything went on the mortgage. Yes it was a lovely big house and my mum loved it but when they finally managed to downsize and clear the mortgage, the relief was amazing.

We could afford to borrow 2-3 times the amount we did when we bought 7 years ago. We don't have the biggest flashiest house but we have spare cash and financial security.