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 would be good but I think wherever you buy should be future proofed. So if you need a mortgage to allow for that then borrow. Even if the market is dodgy if you can stay for 15/20 years less of an issue. Not sure what you are looking for but I would aim to avoid 2 bed flats particularly new build.

Where DD is, in London, the 2 bed flat market is still reasonably buoyant because of the room to rent rules which gives £7500 tax free if you rent out the second bedroom. One beds are the problem. No chance of rent.

Your solicitor can draw up an agreement of who paid in what to the property. The courts do take notice of your intentions and mutually agreed arrangements if anything goes wrong. DD is a family barrister and she will be getting an agreement if she needs to!

Where I am a 2 bed flat is approx 650k & the prices have been around that for the last few years (some dropping actually) so your unlikely to make much on it when you sell. A little further out you can get a 3 bed house for 700k so if I was a ftb again that’s what I’d go for.

Plus all the shared ownership/help to buy near me are for flats not houses. Do they even build 4 or 5 bed houses in SW London these days?

Agree with others, buying in London may be risky ATM if you plan to move within 5 years.

Why are you not buying your 'forever' home now? Would it be worth renting until you do (to save 2 lots of stamp duty etc)??

Also does this money need to form any part of your pension? Could you split it and buy a small London place in cash you could rent out in retirement (solely owned by you) then have a significant deposit for your next home.

Exciting times whatever you decide :)

We were the same ( inherited a large lump sum) and have moved south to Somerset and bought a house cash. There is a lot to be said for it having no mortgage, can you look just outside London as you will get more for your money.

I don't agree with an earlier poster that it would necc be safer to buy in a nice area. From what I understand its actually the areas which have been the more popular/ expensive which are decreasing in value the most , while some cheaper areas in London are staying relatively stable. You might wanna look at that!

If I was you, I'd also wait at least a few months, as everything re. Brexit will (hopefully) becoming clearer at the end of the year - if there's no deal, will prob significantly affect prices in London, again, especially in the more expensive parts.

We were lucky enough to be in a similar situation, we bought a run down house in our dream location (with the cash) and have got a small-ish mortgage (about 20% of house's value) to extend / refurb it. If we ever sell we should make a healthy profit on the house.