Quite a nice dilemma to have but advice would be welcome anyway!

[AllOfTheThings]

Genuinely don't want this to sound like a stealth boast - it's a nice dilemma but it is a dilemma none the less. Advice from experienced people would be really welcome.

Am a FTBer looking to buy in London suburbs/south east. Due to a big dose of luck, will be in receipt of a significant sum in next few months.

If you were me, what would you do: buy a smaller property outright (ie cash buyer) in a not-so-brilliant area, or use the money as a deposit towards a bigger place in a nicer area but top-up with a (smallish) mortgage?

To be mortgage-free would be very tempting, obviously. But it would definitely mean a much smaller place in a less-desirable area.

An eg 100k mortgage would mean a bigger place and nicer area and would be manageable with interest rates as they are but I'm concerned about Brexit (amongst other things) and what that's going to do to interest rates and banks' willingness to lend etc. It all feels quite uncertain atm! I would also have to get a shorter-term mortgage as am (cough) not a spring chicken, so say 20 years or maybe even 15.

The mortgage route would mean me and dp applying together; the cash route would be all from my side, iyswim.

The other thing that might play into it is that this purchase wouldn't be a 'forever' place - we plan to move to a much cheaper area in a few years but we'll be here for another 5 years at least, I would think.

What would you do?

Location, location, location.

You have a third option: use the money for an investment buy to let. That could be a tiny flat in a popular location.

I’d apply for the small mortgage and enjoy the nicer area. Cost of borrowing is cheap for the timebeing

Agree. Mortgage and get somewhere in a better area. If you have a big deposit mortgage rates should be ok.

Yeah I'm thinking location as well rabbits.

But...mortgage-free...very tempting indeed.

I absolutely don't want the hassle of a BTL, tbh.

Agree with pp's re location, especially if you wish to sell in five years. Paying a mortgage will also benefit your credit rating.
However, you say D'P' and indicate that the money is yours, not his, is that correct? Just make certain you protect your money in case things don't work out as you hope.

I think get the smaller place in the better area. If you are going to be there for five years location really matters!

Congratulations on your lucky situation.

Location all the way.

Fair point about credit rating.

Yes, dp and I have already discussed the 'my money' side of things - I love him but fully intend to protect my investment!

So no one thinks it's worth buying a smaller place for a few years to be mortgage-free?

Only your investment if not married

Another for location

I would personally go for the better location too. If the small mortgage is fairly easily do-able then 1. If you can’t sell for some reason at least you’re somewhere you like living and 2. It is more likely to be easy to sell if the property market slows.

Likelihood is that in 5 years if you sell you can then be mortgage free in a cheaper area.

Thanks all, really helpful!

Agree with buying a big enough house in a nice area that if worst case scenario Brexit you are stuck in for a while won't be the end of the world.

How old are you?
If you work in London a 100k mortgage should be easy to afford

If you can get a 25 year mortgage 5 year fix for 100k on a 500k property is only 420 a month.
I suppose the question is is 420 a month for a nicer area worth it to you?

I think the less than good London suburb market might not be too sensible at the moment because prices are going to wobble more in those areas. You could buy somewhere and not enjoy living there. Also, consider where you work and the journey to work.

If you only need £100,000 to get somewhere better, I would. It would rent out better should you ever need this, and stay more desirable. Do buy close to good transport links to future proof. Don’t do buy to let and keep on paying rent. That’s pointless.

There is a big difference between suburbs and zone 1 prices. Have you costed the price differences and what you can afford in each area?

You'd be surprised how quickly ypur 100k starts to reduce if you get a good mortgage deal. Go for the nicer location, you have to live there, go in and out every morning and night, relax there on weekends.... much better in a nice area.

its a tough one. We are currently in a less desirable part of London for reasons other than money. We are mortgage free and for that it's very liberating. We had such bad service obtaining a mortgage a few years ago that I vowed never to deal with that again. Money that would go on interest payments can go to outings etc. If we wanted to rent the house out, we wouldn't have to go through the faff of letting banks know and change mortgages etc. And I can be a SAHM without money worries. BUT we really are a fish out of water in the area. There are no nice cafes, shops, parks etc in walking distance. And one place I have to walk through each day is minging. That said, I can just jump in the car and there are nicer parts 10-15 minutes away so all is not lost. I do get jealous of those that live in nicer areas though....

I'd go to a solicitor and make it clear it was not his property it was mine. Otherwise you will be giving him half your inheritance. I speak from experience.

Buy it by yourself in your own name.

If you are moving in 5 years, you could decide then if you want to own a property together.

Don’t get a mortgage and entangle yourself with someone (even if you really love them) you don’t need to.

Buy outright solo. Simplify your life. Be happy and be free! (And rich) best of luck!

Yes 3luckystars is right..forgot to mention that if the house needs fixing or renovating, then we just go ahead and do it. Others I know that are stretched more financially put up with things like leaking roofs which I know will cost them more in repairs in the long run!!

I'd be very wary of buying in London as property prices seem to be dropping quite significantly, last year we sold a 4 bed house in Fulham for £250k below asking price after it had been on the market for 18 months, I keep looking at the area on Rightmove and have noticed it still dropping. I think there could be a huge crash after Brexit especially in London plus with all the crime that's happening I think it's becoming a less desirable place to live.
If you do decide to buy I'd be putting cheeky offers in on places and maybe look at something that maybe needs a bit of work doing or look on the Auction House web page but in a nicer area, when it comes to selling it probably easier in a nicer area then again I thought Fulham was nice but took ours forever to sell.
A £100k mortgage would only be £400ish a month which is nothing compared to rent.
If it's all your money you are putting into the house with a partner make sure you have something drawn up to say exactly what share of the house is yours or if you're paying for it all have it all in your name, not very romantic I know but if you were to ever split you will thank me.
Where out of London are you thinking of going to in the future? We left London last year and my only regret is we didn't do it years ago.

Buy in the nice area, on your own!

Definitely better place with mortgage- we’re invthe same boat regarding age and opting for a 13 year pay off - Nationwide will give us a 10 year fixed rate which is comforting regarding Brexit.

Tell us what areas you are considering and that will help.