Large mortgage/ ready home or smaller mortgage/ do it upper?

[Laura221]

Can I just canvas opinions around our first time buying situation please? I'm finding making the decision really difficult mainly because we have had a bit of a money jump and this is new territory for us.

Ok so I'm going to roughly lay the two options going around my head-

First one - buy a £300k house with a £20k deposit. Not much work to do on it, only personal taste. This would take us 16 months to get deposit and repayments over 20 years of around £1700 a month. Overall time would be around 21 1/2 years.

Second option- buy a run down house for £200k again save £20k deposit over 16 months but then wait another 2 years and save £24k for renovations. Mortgage repayments around £1200 a month plus possibly a loan? If £24k didn't cover it. Overall time it would take from saving to paying mortgage off would be 24ish years.

My main worry is making the most money out of it to be honest. For me this is a massive investment and I want to make good decisions. I'm not worried about renovations as we could probably stretch to staying in our rented home while the most of it was being done. What would you do? Or what have you chosen to do?

Wow! Well your first mortgage repayment option is more than my take home pay, so I probably wouldn't be choosing that one!!

In all seriousness, to me it would depend on more than simply how much work needed done. Are they in the same area? Would it be worth taking the fixer-upper to get into a better area for less?

What exactly needs to be done? Are we talking new kitchen, new bathroom etc or structural issues? How long would the work take?

If you could wait to save a bit more for renovations on top of a deposit, can you not just save that for extra towards a bigger deposit? That would hopefully bring down the repayments a bit.

watch 'the money pit'...
doer upper is only a valid option if you can do a lot of work yourself and don't mind dust imo.
go in with your eyes wide open and a good surveyer (same goes for a 'good' property)

I know it's crazy repayments. 5 years ago that would have been most of our income. Which is why I'm finding it hard to even mentally part with it let alone agree to it.

I have thought about just having a larger deposit so if we were to pay into our life time isa we would have over 4 years a deposit of £56k (1k per month split between 2 isa plus the £1k bonus each year for both of us)

Both houses would be in the same area. House that needs work would be an extension for an extra bedroom and bathroom. Probably new kitchen, but that sort of thing I'm happy to wait and do over time.

If it makes a difference once repayments are done we will either put away the money we would have used for the mortgage and put it into an isa for retirement or move and take out another mortgage to go up the ladder with the intention of downsizing once we hit retirement.

How much will the renovation cost and do you have the cash ready, or plan to save and do in phases? Beware how much things cost to do and factor in the time spent doing the work/managing trades/choosing fittings/ disruption as well.

The benefit of the cheaper mortgage means if your financial circumstances change (children? Redundancy? Health?) you can take a break from renovation and just pay the mortgage. The more expensive one seems a lot, but depends on how much leeway you have in your monthly income, and presumably you can remortgage for a lower amount in a few years to reduce if you need to.

Is the renovation in a better area? What's the benefit of it, is it because you love the house, location, you can put your own stamp on, expect to make a profit etc. That will influence how much it's worth to you.

It seems you are trying to predict the house prices 16 months into the future... a very hard thing to do
If prices rise you need more deposit
If prices are falling then banks will want bigger deposits. In 2008 Iirc nearly every bank wanted 15% minimum, and were very strict who they lent to
Why are you only looking at 20 year mortgages?

Is the one that needs a major overhaul in a reasonable enough condition to live in?
Will you be able to do it a bit at a time? Or have enough money to move out whilst the biggest things are done?
Do you have enough money to do everything (with contingency as things always end up costing more).
Do you have kids/pets? Difficult whilst doing major work
Are you planning on doing things yourselves (don't underestimate the sheer slog of doing a day's work then coming home am doing another shift working on the house) or paying someone else (costs more, still a lot of disruption and mess)
Finally, big projects can be a big strain on relationships. Everyone's tired, there's a million decisions to make and everything always costs more than you thought, which can be extremely stressful if you don't have enough.

Not trying to put you off, just all things to think about! We're on our second major project, so clearly think it's worth it, but it is not an easy option!

Thank you all for throwing questions at me and letting me think about it. I'll try and answer what I can. So the 20 year mortgage comes from that we can comfortably save £1000 a month plus our rent at the month which is 700 so it makes sense to just pay it off as quick as possible. (Mortgage calculators have giving me this rough number, I'm aware it will be different) We have around 3 months pay saved for a 'rainy' day. Your right I am trying to predict house prices I guess, can you tell I'm a worrier? Ha. We have 3 children already and not having any more. Both of us work. I think its just a tricky situation when we have always had to get the most out of our money to now be faced with plenty of options and trying to make the right one. I like the idea of a project and being able to make it almost exactly what we want. However I think we would struggle with fitting everything thing in work, life, kids ect plus doing a house up.

I think you have all helped make my mind up. The larger mortgage but no work house it winning out I think. I'm just a massive planner and all of this is going round my head but I like to have a clear plan.

Thanks all!

100% the done house with 3 kids in tow

I would get the done house with 3 kids - too much stress otherwise renovating. Stretch the mortgage to 25 years or more initially to bring down your monthly payments then every time you remortgage/pay increases etc, then shave a year off or overpay. You have more flexibility and will put less pressure on yourselves.

With 3 children definitely go for the house with less work,
theres only me and Oh and we bought a doer upper, and 3 months later my bedroom looks like a building site,
the back bedroom is full of stuff and needs new plugs putting in and decorating,
havent even looked at the hall that needs decorating, and then when we have done that (ooh maybe next year at my OHs work rate) we still have to put in an extension on the kitchen, get a new kitchen put in and rewiring in the lounge, then decorate it ,

funnily enough when we looked at it just looked like decorate and carpets for upstairs, and now we are in we discoverd all the plugs are in the skirting boards so unusable with modern plugs and apparently illegal,
so believe me go for the house with less work and less stress

Done up!

The advantage of the doer upper is that you can decide when you want to take on the extra debt for the work, or use savings to do the work. Whereas with the done house you have no choice, you have to borrow the full amount right away and consequently pay the larger monthly payments right away. This is assuming you could tolerate living in the doer upper as is for a while. I'd say prioritising getting on the ladder sooner rather than later would be my key factor, if house prices go much higher you may not be able to buy at all, by the time you've saved the deposit you will need a bigger one and so on.

We went for a doer upper and yes it has been a bit of a money pit, but you have to be realistic and know when to stop spending/what's not worth doing. We have had ridiculously low mortgage payments for the last 5 years and now we are moving up the ladder we realise how spoiled we've been. Having a low mortgage payment is peace of mind that's hard to give up.

The doer upper gives you £500 per month more and doing up a house is not that difficult when you have money. I'm don't get why people would pay more for what looks like the easier option but may not be your taste and people often end up spending on it anyway over the years.

However much you plan you need to wait and see what prices are actually like. I'm a planner too so do understand where you are coming from.

Yes I'd say definitely the done up house, in your situation. What are your current salaries? Do not underestimate the jump from £700 rent to £1700 mortgage plus house expensives e.g. higher bills? You'll have to pay for the boiler/ windows etc when they need replacing. Will your council tax change? I'd also say go in with as big a deposit as you can. Especially in these unknown financial times.

@flirtygirl £500 a month isn't that much when you've got a potential extension, new electrics, windows, plaster, paint, coving, skirting etc etc etc. Doing up a house was A LOT more expensive than I ever imagined. Plus stressful and time consuming. I'm not saying don't do it, just go in with your eyes open.

Is the £300k house big enough for you without extending? What’s the cost per sq ft of each house?

Unfortunately I don’t think your £24k will go very far in extending and putting in a new kitchen on the cheaper house. That amount could quickly get swallowed up with for example a new roof, windows, central heating overhaul, electrics, redecorating etc before you even think about new kitchen/bathroom. You might find house 2 costs just as much as house 1 once you’ve done everything to bring it up to the same standard.

All I will say is DS bought a doer upper. A two up two down terrace, so no mansion.

Total spent so far 21k and he still has no carpets or curtains or furniture and has only decorated two rooms and has no internal doors and a hole in the fireplace.

24k will be gone in a flash.

There's a big difference between 200k and 300k. Is there no middle ground? House that is structurally sound and with a suitable layout and very livable in but not necessarily to your taste or a wee bit tired. No premium (and it is a premium that you will never get back unless you sell on in the same condition - and that will be never, ever if you go for a new build) for it looking "done" but more flexibility for re-decorating as and when.

Well there is planning - but what you are 'planning' may simply not be possible! You don't know what houses are going to come on the market, you don't know how much work a 'doer upper' would need even if there was one. That's not planning it is a possibility in the future!

I wouldn't look at a house as a profit making tool, you need to stay in any house for a while to make money.