FTB - stretch or not?

[CalvinTheCat]

We're first time buyers and puzzling over what to do.

Our max budget is £150k. We have £30k deposit and although we can borrow up to £129k we've set ourselves this budget as the repayments become unaffordable.

We were hoping to get a mortgage etc cheaper than our rent but at £150k it would work out the same or more expensive (when you add council tax and insurances in)

But £150k seems to be the price where we get a decent house, and anything up to £140k is houses which need a lot of work or are too small. We're a family with 1 DC and hope to add another. We also need to learn to drive which would be hard to do on these repayments. But equally it's hard to do now!

On the plus side I'd expect my income to increase a little bit soon. On the downside, having another child will throw all this into chaos!

Did you stretch? Did you regret it? We want this to our forever home, we don't want to move again. I think it's best to deal with paying more than we'd hoped to now so we never have to move again, my husband disagrees! We've already had a sale fall through and it was at the lowest end of our budget which has been a lesson that places that cheap are cheap for a reason and we should be prepared to pay more for a better place. We're going to see a house at the top end of our budget but it looks like it needs nothing doing do it.

It’s a difficult one; I can see your reasoning, but we went with your DH’s thinking. We bought a house that needed a fair bit doing and did it when we had the funds - also threw another child into the mix! We just felt safer having more reasonable mortgage repayments; we were happier knowing that if we were strapped for cash, xxx would have to wait a while but the mortgage was always covered.

We recently sold a house that we owned for ten years, it didn’t increase in value during that timescale! So now I’m certainly keen to buy able to over pay my mortgage to get it down, it will feel like a safety net. Have you ever seen an online calculator for mortgage over payments and how much it can save in the long run? That might be something that can give you something to think on.

If it costs more to own on the average mortgage than it does to rent that is a sign that property is overvalued. I would wait for the next crash in your position.

Well I think I would go with the house that feels right, even if it needed a bit of work or wasn't perfect with regard to the budget.

If you love it, then you will make it work.

I think as FTB and hoping to extend your family, I'd be cautious. When renting, if things become a struggle or something happens to your income then you can give notice and move to prevent problems escalating. When you own somewhere, it's not as easy to prevent things mounting.
I have just offered on a property that is £146k because although small I love the area and it ticks a lot of boxes for me...... One big box being the ability to afford to live a little, have some nice things and go on holiday and SAVE! I could actually go up to £185k but do don't want the massive repayments, higher council tax and risk etc
You never know what's around the corner....

Stick within your budget then at least you know you can afford it. You can take your time over improvements if the house needs them. There's nothing worse than worrying about money. It causes more marital problems than almost anything else!

The problems and work needed doing to cheaper properties haven't been cosmetic things though; in the place that fell through, it was severe damp which we couldn't have lived with. £150k is a cheap house here - it's just at the upper end of our budget.

Our rent too is not too bad but in this area it is increasingly rapidly; we are very likely to be hit with a rent increase or priced out soon.

The mortgate itself on the place we will see is about £480 - it's the additional that adds up to our rent (council tax is £82 a month, then life and home insurance added)

(I am in NI so when renting we don't pay council tax)

If it’s your ‘forever home’ then you need to think long term. Look at schools in the area, size of garden, off-road parking, transport links and square footage of house. Also check houses close by to see what improvements and extensions they’ve made for example a house where you could create off street parking vs one with no potential to do so.
Get the best house for you in 5 years and 10 years. So while a property that needs work might not be the best now if it will be in 5-10 years then that’s a better bet.

We were basically renting a horrible cupboard when we were saving for our house so it was a weird situation. Our rent was £600 a month (for London commuter area, it really was a pit of a flat!) and our first mortgage repayments were £1350 a month which, while doable, was a terrifying leap. But we were told we could borrow a lot more than we did (up to £1,800 a month payment - not a chance, I basically would have laid awake at night worrying about the boiler breaking or an unexpected bill as we'd have had nothing in place to sort it!).

We tried to pre-empt a lot of things we might want in the house (I was pregnant with our first when we got the mortgage and we knew we'd want a second if we could) in terms of room size and nearby schools so we're here and comfortable until we get our forever home which might be in another five years or so (DH wants to do it sooner, but I'm very cautious about overstretching ourselves!). If you were going straight to your forever home I'd be tempted to push it if you can without worrying at night - I think we've got one more house move in us and I despair at the costs of legal fees, surveys, moving, stamp duty etc. If we could have moved straight into our forever home I think we would have.

What I didn't expect was at the end of our fixed rate period our mortgage broker was able to renegotiate our rate with our lenders so it went down - so after two years it went from £1350 a month to £1200 and then £1000 two years after that. We've been overpaying up to the original £1350 every month and are now set to pay the house off nine years early. I appreciate mortgage rates may go up as well as down, but for now we've found that pushing ourselves to what was our limit (if not what the bank would have given us) was worth it. It's terrifying though!

We are currently in a period of low inflation, so your mortgage will not shrink in real terms.

Interest rates are at historic lows and are expected to move in an upwards direction.

If you fall on hard times, you can postpone home improvements, furnishing etc, but you can't postpone mortgage, council tax, utilities, commuting costs.

Our broker has fixed our mortgage for 5 years so we know what we're paying for that term at least. The house we are looking at is the top of our budget but is great - huge garden, big rooms, brilliant area and it means not needing to move our son from his preschool, and great schools. Which is why heart is set on it a bit. Lower budgets mean such big compromises - lots of work and bad areas. I work in a very awkward place and commute by cycling too and this house means I could keep my current lovely cycle by the river.

So it's all that stuff too which is why I'm thinking it's worth not saving much a month.

I think I'd be tempted to stretch in your position.

With a young child and another planned it's going to be hard to live in a building site if you need major work doing. Major work always takes longer and more money than expected in my experience.

So long as the more expensive house would do for at least 7 years or more.

Every house I've bought has been a stretch for the first few years, money was tight when my kids were little but it was worth it to get on the ladder.