How much would you compromise on for 100k?

[Kaleandcake]

Seen two properties that we like - in different, both both popular, areas of the south east. One for 600k (4 beds) one for 500k (3 beds). Apart from the extra bedroom, the more expensive house has an en suite, a bit more downstairs space, and is finished to a more polished standard. We can afford it, but it it will mean maxing our budget and taking on a 35 year mortgage. It's doable, and I'm not too worried about affordability long term, but 100k is a lot of money!

What compromises would you make for 100k?

The extra £100k seems worth it. I'd say get it while you can afford it. If you are in the edge of your finances, it may become beyond your reach later down the line, and extending will likely end up costing just as much.

Buy the 3 bed and do a loft suite when you can afford it.

For me that would be worth it if I wanted 4 beds

It totally depends on your circumstances. I wouldn't be willing to take a 35 year mortgage so would likely choose the smaller house. But I also don't have kids, if you're sitting there with 3 teens then yes I would pay to extra 100k as it would be worth it.

Our trade offs are all around size and location and mortgage size and term. We could be in a bigger place somewhere out of the city and pay the same. Or we could be somewhere bigger and/or in nicer neighbourhood if we maxed out/extended our term.

So we have enough space for everyone but not extra. I am very risk averse though and we are reducing our term and overpaying to get mortgage paid off as soon as possible. So in your example it would be a no brainer. Assuming the 500k is a nice home, there is no way I'd be paying extra to max out budget and be paying for longer.

You need to factor in interest payments. In your example it's a lot more than 100k difference. The extra interest payments over higher amount and longer term will increase that significantly.

Are you planning to stay there long term? If so, my questions would be in relation to whether the extra time/interest paying off was worth it. If it's a difference of ten years paying off (for example) - are you going to be loving your extra bedroom and en suite as much? Would it have given you enough joy in the earlier years to be worth the extra payments?

Wouldn't be swayed by finish unless it was real value items or exactly my taste. Too easy to hide a multitude of sins.

If you plan to sell in future and reduce your term on next property then it's a different set of questions about retaining value/resale etc.

Depends if you can see the 3 bed as your long term home, and it suits your needs

Do you need 4 bedrooms? (Eg do you have 2 kids, need to work from home in office space, have family to dry often etc etc)

How old are you? Are you likely to start earning more in your careers over time?

Those are the questions to ask yourself

We never overextended ourselves on mortgage and it's been great for peace of mind when shit happened (as it does), to me 35 yrs is a looooong time 😬

Definitely worth paying the extra if it means you won't have to move in a few years when you run out of space. If you can comfortably afford it and you think your jobs will be secure if we do go into a recession then I would go for the 4 bed house.

This is so subjective, the list of what people think odd as too much compromise is endless. If you are effectively paying £100k for a guest room that is hardly ever used and an en suite, then many people would say not worth it, while others may have loads of regular visitors so guest room would be important. Same goes for number of people - eg will 3 beds mean 2 kids have to share?

Think of not odd

I wouldn't be willing to take on a 35 year mortgage either. I appreciate you will probably downsize before the 35 years are up, but a 35 year mortgage gives you a lot less room for manoeuvre if you get into negative equity and end up on an expensive standard variable rate and can't re-mortgage. I always like to stress test if I think I can walk away without going bankrupt if circumstances change. If you have a lot of equity, it may not matter so much.

You also need to build your pensions so don't over mortgage to the cost of that. State Pension ages are rising and if you don't enjoy great health in your sixties, you are not going to want a mortgage then.

@NCGrandParent understands it.
The debt is not just £100k.
It’s £100k + interest over 35 years. Over 25 years it’s £175k, over 35 £212k.
Both terms 5%

All good points, and all things we're conflicted over! Mid 30s, one child, very much on the fence about a second. Both wfh so the extra space would be nice, but could possibly add a small garden office to the 3 bed.

35 year mortgages around here don't seem too uncommon, and I'd hope we'd be able to overpay after the nursery years to bring the term down significantly.

As we're relocating it's so hard to know if we're looking for a forever home! That was the initial plan, but there are so many factors to consider.

We have a decent amount of equity from previous sales, about 400k, so the more expensive house would effectively mean double the mortgage. Just not sure if it's worth it.

How do they compare energy-wise? Would it be a lot more expensive to heat the 4 bed? Are they both insulated, double glazed etc? You don't want to land yourself with higher bills if possible?

What about council tax costs?

Would you use the en suite and the extra bedroom?

What's the difference location-wise?

The cost you need to consider is the cost of moving to a bigger place if at any time in the next 35 years it turns out you do want it.

SDLT, conveyancing, perhaps a less favourable future mortgage (esp if by then you are in your 40s and can only get a shorter term one), perhaps a greater differential between 3 and 4 beds in the future (although some thing house prices will fall so the gaps between the rungs could also get smaller).

All those things could easily add up to £100k. So, if there's even a 50% chance you'd ever want the bigger house, it's worth stretching now.

And, with a bigger house, you have different options. You could have an office and consider WFH. You could let a room and generate £7.5k of tax free income (doesn't have to be to a stranger). You could accommodate a live-in nanny or carer. Your DC could live with you more easily as a young adult while saving for their own deposit.

If your potential for more earning as you get older is good I'd say do it - but if you and your partner don't expect to earn a lot more I'd be careful.
A 35 year mortgage takes you to 70 or so - that's a heck of a noose to have!

Hopefully interest rates dropping (but that's a good few years away) and less nursery fees will help you get the amount owing down - if you go for the expensive house I'd make it clear to your partner that you want to cut down a few other expenses to pay it off early.
Make sure you pick a mortgage that allows overpayments if you wanting to do this; I have a friend who didn't read the documentation carefully and she can't pay much in addition to her standard amount without horrendous fees.

See if the more expensive house would take an offer. We bought in an ailing market, so were able to offer well below the listed price. At the time we set our mortgage to 20 years whereas ordinarily we'd have gone to 15 but we allowed for a 5% increase in interest rates and used that to calculate the payments we could afford. As it turns out we paid off a few lump sums and reduced our term and it was paid off in14 years.

You have 400k equity, is that being user as a deposit? I.e. is your choice between a 4 bed house and 200k mortgage or a 3 bed house and a 100k mortgage?
At your age I would go for the 4 bed house.

With that much equity I'd go for the bigger house. You can reduce the term later when interest rates go down.

100k extra seems a good deal to get an extra bedroom and downstairs space.
Could you get the extra 100k as interest only and pay it back when you downsize?

Likelihood is the extra bedroom, bathroom and downstairs space will cost more than £100k to add to the 3 bed. So if you think that space is what you need, and you can genuinely afford it, go bigger now and save yourself the time, money and hassle later. I'm in the south east and an extra bedroom and bathroom in the loft is about £60-80k plus vat depending on who you ask.

If I had only one child I would absolutely not pay 100k for a 4th bedroom. Ensuite and finish not important to me. But I am risk averse and like a simple life, you might be different!

You don't sound excited enough about the 600k one to justify the expense. And 35 years mortgage is really a bad option if you can afford 25 years. I'd take on additional finance burden for a 'dream house' ie paying more to be in a location or for a house that I truly loved. If you are happy enough with the cheaper one, go for that and enjoy the extra lifestyle choices a smaller mortgage brings you.

I would not be maxing out my borrowing in your situation. What happens if you have another child and therefore another lots of maternity leave and another lot of childcare costs.

It really depends on so many variables and individual circumstances.

we are about to buy a 4 bed but only because the dimensions of the 2 bedrooms for my teens were better than some of the 3 beds we looked at.

for me in your position would depend how comfortable I would be financially with the 3 bed and if the extra for the 4 bed was overstretching. Would also depend on whether I planned having more kids or needed extra rooms for WFH or guests. Would also be age dependent for me as we are in our 40’s (DH in his 50’s) so wouldn’t want a long mortgage term.

location would also be important to me. I’d rather a cheaper house in a better location than a 4 bed in not such a good location .

if you love the 4 bed more than the 3 bed, you have the ability to comfortably manage the mortgage and if you plan maybe having more kids then the extra money may be worth it as would probably cost more if we decided to later add a large extension to the smaller house

we decided to move rather than extend as we knew the cost of adding an extra bedroom, en suite and downstairs toilet to our current house would probably be more than what we intend to spend on the house we are buying

I would never want to borrow to the max - unless it was my first home of course - unless no other option because it makes life tough if you are trapped on the treadmill.

So I would probably never be looking at the higher price property in the first place.