to put all our money into a house or buy a cheaper but in need of work flat

[jioagiahg]

We finally have a buyer for our place - great. However, it seems that for our onward purchase we have the option of either borrowing to the maximum to get a house or settle for a rubbish flat (the only one we are close to getting our offer accepted on is quite small and run down). We're in London so it does feel totally insane to be borrowing our maximum but on the other hand ended up in a run down flat with a kid also doesnt seem ideal. My parents are advising us to go for it and just get the house we want but with the rising interest rates, I am feeling very unsure. There aren't any two bed houses in this part of London and we are stuck here because of schools. We tried to put offers on nicer flats but our offers got turned down. Any pearls of wisdom from MNetters?

I wouldn't risk it right now. Can you look out of the area for something else?

It feels so uncertain at the moment but DC is settled in a really nice school and am quite reluctant to move them especially mid-year.

House

I’m not sure why the two options are a house or a run down flat? Why not look for a nice 2 bed flat?

I’d always pick a house over a flat, having owned a flat. Being at the mercy of the freeholder, having to make decisions with other leaseholders, the noise. But I understand your quandary with rising interest rates. I do think I’d still buy a house though if I could.

Can you say your budget and area? Maybe MN can help!

So we have tried to buy a nice flat in the area but keep getting our offers turned down because we are in a chain and they keep getting offers from other chainfree and often cash buyers. So we've tried but failed. However, we are also literally running out of time as our buyer wants us to find something now. So thats now our choice. The problem with the house is that it's literally at the top of our budget and we'd have a 550k mortgage which terrifies me. It would only be 340k for a flat. But it has taken us so long to get a buyer for our one bed that we need to move now even if not ideal.

340k and 550k would be our mortgae - we do also have some cash towards deposit so in total the flat would be 540k and house 750k.

I also confused why the options are a house ready to move into, and a run down flat? Sorry if I've misunderstood?

We have been renovating a derelict property for 2yrs- but almost done! The cost of materials has gone through the roof! We had to lock in the cost of steels within 7 days- to give you an idea of how quickly things are going up. Our overall initial costings have tripled!!!

If minimal work is needed and it would be livable, but needs redecorating in time- then go for it. If you can do some of the work yourselves- go for it. If it needs a complete overhaul, rewiring, roof, flooring, walls moving etc etc- then I'd avoid unless you have the time and money to do it now.

I wouldn't go for a flat in this market tbh. Ideally I wouldn't go for a project either but a house is a safer bet than a flat in this climate.

Borrowing maximum isn't the worst thing if you have secure jobs & can fix.

I get that the dilemma is a bit weird. It's just what we've ended up with as a choice. We have put offers 9n every nice flat that has come in since Sept but despite offering the asking price or above keep failing to get out offers accepted.

Can you move a little further out but not move schools?

Also a lower LTV makes maximum less scary & obviously a mortgage of £800 out of £3000 isn't necessarily more affordable than a mortgage of £2000 out of £6000, even though the % is lower.

And when you say max budget are you talking about borrowing 7 times or 5 times?

@finallydones its up to the maximum that the bank would lend us which I think is just under 5 times our joint salary. We are also not young and our both 39.

5 x your salary isn't that scary when your mortgage is 550k vs 750k house & I assume you have good salaries.

However due to age & high prices/stamp duty you really don't want to move too much so I would definitely go for the house.

I was going to say house, but those are massive differences and £550k is a heck of a mortgage. I think I probably would go with the flat unless you absolutely love the house on top of taking on a huge mortgage

Personally I don't see equity building how it did in the past, we are in for lots of stagnation I think.

I vote for house. You’ll keep it for longer!

I would love to go for the house, just so frustrating that despite rising prices, house prices haven't dropped. Though if that happens then ours would have dropped too. I really hate the current housing market

I'd sell and rent now, house prices are going to go down.

Well normally it's easier to move up in a drop because the % drop is less cash but I don't think it will hit till next yr.

house all the way if you can afford the monthly mortgage payments

Some are forecasting only a 4%drop next year - which makes up for the 9% increase over the last few years

inflation is meant to peak by 2024 and the market could stabilise as pricing becomes clearer - though We will not go back to the low interest rates

so there may not be rampant short term growth but who cares if it’s your long term house.

the house will be your home not an investment and you will grow into it

also cost of works right now is a nightmare right now - cost of steel/materials, labour shortage

I'd go for the house everytime - you will be happier and will want to stay there longer. If you can afford the repayments and plan to live there longer term (more than10 years ish) it doesnt matter what the rest of the housing market does. If you bought the flat you will always be thinking about the what could have been and will probably want to move again in a few years time as your child grows, plus there are annoyances of other flat owners, service charges, having to do maintenance to a particular schedule etc etc which can cause hassle in flats