Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Original poster

Are we overstretching on our 1st London house??

41 replies

Galwithaquestion · 02/02/2022 15:04

Hi lovelies,

My partner and I are in a position to buy a house starting now, and have a deposit that gets us up to 15% of a £595k house in a beautiful, safe South London location that we both know very well and are currently renting in.

We have made some calculations and stress-tested ourselves, and are divided on what to do!

My partner is happy with a house in a less (I'd say far less) desirable area of London closer to £550k.

I think we have just found a house that ticks our key boxes in just an excellent area, which we'd realistically need to offer £595k on.

Do you think either of us is missing anything important?

On our incomes an interest rate doubling would take the mortgage to 37% of our hh income, which is above 120k. Redundancy would mean we'd need to rent out a room, but would then be comfortable.

We are expecting salary increases this July, which is also great. But I cannot help but think I am stretching too far and will be really constrained to stay in a stressful job because of this awesome, but expensive house. Have been dreaming about a career change in 5 years. I know, a lot going on! :)

I still think it is worth stretching, especially since having kids is at least 5 years away, and we could be in a less tight position then given our jobs.

What do you think? AIBU??

OP posts:
TheVanguardSix · 02/02/2022 15:08

You want a desirable area with good schools if kids are on the Life Menu.

Haus1234 · 02/02/2022 15:29

Most people have to stretch to buy in london unfortunately! £45k doesn’t seem like a massive difference to get a considerably better area - are you losing out elsewhere though on something which might be important in future (eg outdoor space)?

RichmondMumof2 · 02/02/2022 15:30

Sounds fine. Interest rate doubling and still only 37% of income is great.

If interest rates double for me I'm looking at 44(%)

Growbean · 02/02/2022 15:34

I’d always go for the best area you can- it’s the one thing you can’t change.

dreammattemousse · 02/02/2022 16:01

Location location location

We just over paid massively to get a house in a decent area! Not in London but a large city..

Always get the worse house on the best street...

LeahPaige · 02/02/2022 16:06

I've been wondering the same thing. We are looking at. 450k house with a 60k deposit and the stories of increasing interest rates have worried me.

But the house is in a beautiful area, good schools, country side and only 10 mins from the city centre. We've looked elsewhere and honestly the monthly payments on a cheaper house cheaper area aren't substantial enough for us to even really notice

Double interest rates would be 33% of our income (after tax deductions) which although not ideal would be affordable.

Plus we don't want to move for a long time so hopefully by the time we move we will have an increase in equity.

Original poster
Galwithaquestion · 02/02/2022 16:12

So good to hear these stories and inputs from people in comparable situations.

Maybe to give you more info:

The house is in a really good area for schools when that becomes relevant, and nestled between two completely unaffordable streets and very unaffordable areas for us, so really ideal in my mind.

Also, I double checked on the calculations, and a doubling of rates to 4% would take our mortgage payments to 36% of net hh income, 6% rate to 43% of net hh income. So it could definitely get steep if rates continue to rise leading up to the 5 year mark...

Really wrangling with this, because I really don't want to end up in an excellent property, but with sleepness nights over what could go wrong (I am a bit of a worrier, but working on it :) )

OP posts:
YankeeDad · 02/02/2022 17:00

Could you buy the house in the ideal location, subject to agreeing with your partner that you will start paying 37% of HH income towards the mortgage immediately?

That way he'll (and you'll) enjoy the better location, and you will be able to experience less stress about the debt, because so long as you get a fixed rate mortgage for at least 3 years, by the time there is any risk of higher interest rates affecting you, if my back-of-envelope math from your data is correct, the mortgage balance remaining should be no higher than if you'd bought the £550k house in the first place and then paid the minimum on the mortgage for that one.

ThePlantsitter · 02/02/2022 17:07

I can't see what the advantage of the cheaper house is. Monthly, that 40k can't amount to much can it?

You love the area, you have contingency plans, you can see yourself staying in the house. I say do it.

MsMeNz · 02/02/2022 17:18

I'd say go for it. It's not like you are talking crazy amounts diffrence from the not so great option to the better one. As you say there are things to do if emergencies happen, have a flat mate, getting any old extra job, or If everything goes bottoms up then you can sell. But I doubt that it will come to that just try to ahve some savings behind you to build up again as hosues often come with suprise expensive costs... Heating system broke or hidden leak damage etc.

sarahb083 · 02/02/2022 18:18

I agree with everyone else - for £45k, it seems like the more expensive house is the obvious choice. @YankeeDad has an excellent suggestion - overpaying on the mortgage can make a massive difference long term.

pinkhousesarebest · 02/02/2022 18:30

A friend of mine who has done very well in property always said buy the most expensive house you can, even if you have to pay it over the longest term. That way you won't waste money in ten years moving again ( which is what we did, and in a country where it costs a fortune in taxes).
I wish I had done that instead of going for the cheaper option which was so much of a compromise. You are young, so much earning potential ahead of you.

stuntbubbles · 02/02/2022 18:35

A friend of mine who has done very well in property always said buy the most expensive house you can, even if you have to pay it over the longest term
I wish I’d done this. Sunk so much money into fixer-uppers when I’d have been better off buying the fixed-up, and putting the renovation money into investments.

SeasonFinale · 02/02/2022 18:36

Definitely go for the £595k house in the better area. You are more likely to want to stay there (or at least longer). With the other you will always have one eye on the market and an extra move would end up costing more in agents fees and stamp duty!

icelolly12 · 02/02/2022 18:38

Location, location, location! Go with the home in the good area, you'll forever regret it otherwise.

Thinking2041 · 02/02/2022 18:41

Moving costs so much money.
Stamp duty, surveys, solicitors, the new things you inevitably need to live in the space. £45k is not much (relatively) for something better. This is a no-brainer for me.

user1477249785 · 02/02/2022 18:45

Honestly £45k sounds like a lot (and it is) except not on a mortgage of this size. You will hardly notice the monthly difference. It's a no brainier for me.

Original poster
Galwithaquestion · 02/02/2022 19:00

Guys, this is so useful. Glad my gut feeling was right, and our calculations sufficiently conservative. @YankeeDad, absolutely agreed and worth doing. @Haus1234, there is nothing as of now that we find seriously off-putting about the house. I guess the survey and searches would reveal anything more dramatic than preference-specific things!

Since you have all been so helpful with thinking about this, the least we can do is update you on this journey. We will make an offer tomorrow... Eeek!

OP posts:
Original poster
Galwithaquestion · 02/02/2022 19:03

@MsMeNz you are totally right. We have been trying to really bring down unnecessary spending over the past weeks to adjust and create a pot - it is harder for me because I had not-so-great habits from the past. So definitely working on it - some days harder than others, but it's a process...

OP posts:
Calmdown14 · 02/02/2022 19:05

I am as cautious as they come but in this case I'd go for the more expensive option.
Either way you are committing to the need for two decent salaries so it's not really reducing the risk.
The lesser area is likely to be harder to sell and shorter term which increases your cost in the long term with stamp duty and fees

Clymene · 02/02/2022 19:06

Assuming you're young and you have no kids, get the biggest mortgage you can manage. Even if it means cutting back. You're investing.

FurierTransform · 02/02/2022 19:10

If you're worried about rates rising, just fix for 10 years. One of the UK banks recently released the lowest ever 10 year mortgage rate...

RaoulDufysCat · 02/02/2022 19:22

Have you checked the actual school admissions data? Because sometimes a cheaper road very close to an expensive road is cheaper for exactly that reason. Catchment distances can be very tight in London.

Didiusfalco · 02/02/2022 19:28

If it’s as good as you say, don’t you need to make a decision quickly before someone snaps it up?!

Nevilleslongbottom · 02/02/2022 19:28

Not getting the biggest mortgage we could prekids is one of my biggest regrets in life. We’ve always been too cautious and as a result are in a small house in a shit area with 2 kids and having to move again. We could have brought our forever house 15 years ago and we’d have paid most of the mortgage off now, instead of taking out a bigger mortgage over a long term in our 40s.

Property prices might level off a bit but I can’t see them going down anytime soon.

Get the more expensive house!