Is it better to buy ASAP or save for longer?

[SecondhandTable]

We will be FTBs and we have just realised we actually have enough in savings to put down a 10 per cent deposit on some of the standard 3 bed terraces in our area. Originally we had hoped to save for another 3 years or so, doubling our available cash and allowing us to either buy a larger house or a similar house but with a smaller mortgage. However house prices in our area seem to be rising at a gobsmacking rate since 2017/18 and it's getting worse not better. We want to stay in this small radius for school/childcare reasons, it's one of the most desirable areas in the city.

Are we better off buying ASAP with the smaller deposit or continuing saving and then either buying bigger ('forever home')/buy smaller home but with much less mortgage? How do we know what is the best thing to do?

Sorry I just meant we don't have money to like gut a house out and redo it all if it was a proper project house needing tons of work etc. As long as it's livable we are absolutely fine with dated fittings etc with a view to save and redo things later down the line, as you say we have to be realistic about what we will be able to afford. The thing we don't want to compromise on is the area, for childcare (to be close to relatives) and school catchment reasons.

10% deposit won’t give you a good interest rate, the sweet spot tend to be 25%. Now for the Crystal ball question it s like asking if you should buy some Bitcoin or Tesla share. Here in London, flat prices were flat since 2015 and start to fall at a rapid rate (double digit in central location it seems, time will tell). Houses WITH garden fare better but no exactly going to bidding war either. Now the price in the capital were astronomical in the first place, and there is no way a first time buyer in his late 20 or 30 with a mainstream job can buy a family house unless mum and dad chip in 500k or more given that most decent homes in decent places cost at a bare minimum 1M. So there are a lot more room for a fall compare to where you leave which feels like pocket change money really but anyway, as it should be in fact.

@Paulina23

10% deposit won’t give you a good interest rate, the sweet spot tend to be 25%. Now for the Crystal ball question it s like asking if you should buy some Bitcoin or Tesla share. Here in London, flat prices were flat since 2015 and start to fall at a rapid rate (double digit in central location it seems, time will tell). Houses WITH garden fare better but no exactly going to bidding war either. Now the price in the capital were astronomical in the first place, and there is no way a first time buyer in his late 20 or 30 with a mainstream job can buy a family house unless mum and dad chip in 500k or more given that most decent homes in decent places cost at a bare minimum 1M. So there are a lot more room for a fall compare to where you leave which feels like pocket change money really but anyway, as it should be in fact.

Agree that it depends to some extent on location. Prices in Yorkshire and the north west are expected to rise by around 30% over the next 5 years, while any price increases in London are expected to be far more modest. If you are buying outside of London and the south east, I would definitely buy ASAP. In the future, home working will encourage people to buy bigger homes in cheaper areas and will probably lead to more even distribution in house prices.

@MidnightMeltdown yes, one of the reasons we bought where we did was because it's a supposedly upcoming area (I know, I know) it's in the Midlands, 4 bed "executive" homes come in comfortably under £400k, but can still be in London in a little over an hour, a lot of our neighbours are SE "emigrants", many of whom will blend work in London. Whilst I know the market may be rocky over the next year I do think areas like ours will fare well with people demanding more house for their money and more flexible working options. I myself have applied for 4 promotions this month all 40-70 miles away as I know I can predominantly work from home, I wouldn't have applied a year ago.

@SecondhandTable definitely being near family for childcare and good schools is more important in the long run.
It sounds like a lot of places near me. We moved from SE to NW. We sold at a lucky time, prices have definitely tailed off now where we were and Midlands and NW prices are just going up, this will only keep on as more people like myself are moving (usually back) up to the Midlands and NW now working from home is more established.

Yep, we are in the NW. Soo many people in our area have come from further south. Basically anyone who moves to this city wants to live in roughly this area. There's only really one vaguely good comprehensive secondary school in the whole city, which again is in this area.

@SecondhandTable Yeah, you don't want to wait too long to find you're priced out of the area. Especially if school places are going to become competitive.
The other thing I was going to say is, I don't know your relative but if prices are going up they may want you to move on so they can start to profit from the price increases.
We're just remortgaging, staying with the same lender and they automatically increased our house value by 10% without even coming out to look. We have done work but I was fairly surprised, we've been here 3 years.

I would try and buy but choose a house that you can put up with for years if you get 'stuck'.

We bought a starter three-bed that was a bit rough around the edges and not a lot of living space, but we knew that we could live there with up to two kids forever if needs be. We're moving now and have made some money with the equity, but if the house had ever gone into negative equity we would've been okay staying put.

I would crack on and buy. Look for a property with potential to extend in the future if circumstances allow maybe.

But you will also find after a few years of house prices going up and eating away and your mortgage debt that you have the option to move to a bigger property.

If you would be buying the smaller house with a view to upsizing later I would just wait and get the bigger house.

We bought a small house in 2010 pre DC. We did not stretch ourselves and could have spent 20% more but at the time it seemed the sensible thing to do.
We are now moving to a bigger house - which is what we could have afforded 11 years ago but, although they have both increased by the same amount in % terms, it is now worth loads more!
If only we had waited a year or two to see how life panned out (we bought during during the financial crisis) we probably would have gone straight to the bigger house and wouldn't now be spending a fortune to move.

Alternatively, I would look for a house with potential to extend and turn into the house you want.

Thanks everyone for your input. We have decided to start looking now, we are not in a huge rush to move but houses here to so quickly and prices are rising so fast it makes sense to start looking. We have booked a bunch of viewings for later this week. We know we need to get an AIP ASAP, should we do this via a mortgage broker? I have a recommendation for L&C through word of mouth. Then what happens, once we have an AIP we can start making offers if we want to?

Any words of wisdom for viewings, things to ask/look for etc? We've viewed loads of flats before in our many years of renting but never houses and the gravity of a bad decision here is obviously much larger than a 1 yr AST! EAs keep telling us houses round here are often going under offer after 1 day of viewings so I imagine until we've got a solid AIP and are feeling more confident it may be quite awhile before we settle on something ready to buy especially as investors often offer more to snap up stock for the rental market. We are both feeling very clueless and nervous!

The other thing that you need to factor in is if you don't buy now and then one of you/both lost your jobs it could be very difficult to get a mortgage. We may well be in a situation in a a year or two where there are lots of job losses so think about what sectors you are in and how they might be affected.

With everything you have said, I think you should buy now... and near good schools. Don't be scared of a small project or at least a tired property, something you could live in and when you have more savings could improve. If you could get away with two bedrooms (little ones can share) but have the opportunity to extend to 3 or 4 this would be a good investment (loft conversions are very cost effective for instance). It's a much better investment to improve a property rather than move in a few years.

If I was you, concentrate on area (schools etc.) and then trust your instincts. Look at sold prices online (although they are a few months old), study floorplans at length so you can see what you can improve for instance rather than get hung up on someone else's decor etc., get a compass app so you can see which way gardens face etc. (orientation is usually on floorplans anyway though), if you find somewhere go and sit outside at different times of day and see that you like the street, the look of neighbours etc.

First viewing down! House had loads of damp upstairs on the ceilings especially around the chimney breasts. It's hard as FTBs because we have no idea how much it would cost to fix stuff like that all the damp would need sorting out, the whole house redecorating, new kitchen as well. And we don't have disposable income so I guess we'd have to take loans out to do the work?! How does anyone not feel utterly clueless as a FTB haha ?!

@CeeceeBloomingdale

I would and it’s what most people do. Property rarely decreases in value so it’s normally making you money while you aim for the next step of the ladder.

This. The longer you wait the further away what you wanted gets.

The particular house you’re talking about doesn’t sound viable for you.

This was one of the reasons we used HTB. We already have children and didn't have the cash (or patience and time) to do something up. HTB enabled us to buy our dream long term family home without requiring a lot of up front cash. I'm quite confident we'll be able to mortgage it out within 5 years as our salaries are already higher than when we first took it out and we were close to being able to borrow the full amount ourselves, and, unless the market truly crashes in the next 4 years, our area has been quite resilient in recent years (even new builds, especially actually because they've created a desirable area).

I appreciate this approach isn't for everyone and not without risk, but feels like the right thing for us.

We would definitely be up for considering a new build but there aren't any in this area that cost less than about £450k so it's unfortunately just not an option.