New dilemma - to borrow more for a big house or sit comfortably in a smaller house?

[ThatNimbleOP]

Hello again,

This is all really first world problems, i do feel grateful to just be debating these things but wanted another insight again.

We have had an offer accepted on a property but it is near the top end of our budget. The house is beautiful but it would mean our mortgage was relatively high.

This wouldn't be an issue in theory but i would like to cut down my hours at work to take care of my DD and thus this might be a bit trickier with the higher mortgage.

What would you do in this position? Would you go for nicer house and just try and make ends meet or go for something smaller and cheaper but knowing that the mortgage is less and i can cut down on work.

As we are fixed there is a mortgage difference of £300 a month on the new house (borrowing extra £60k) vs keeing existing mortgage. Bills will be around the same. So in all honesty it is not a huge difference but is a larger house more costly in the long run?

Thanks again :)

Hi Op, I’m sorry but it’s hard to say how affordable this is without knowing how much spare income you have each month (with the reduced salary from working part time). I wouldn’t choose a larger house over time with a child unless smaller house really doesn’t meet needs.

An extra £60k over 25 years with potential higher earnings on the horizon ….I would. If you intend never to work again and have no disposable income….probably not.

but in genre terms I think it’s normally better to go for better house even if it’s a bit of a stretch.

I would move to the bigger house.

It doesn't sound like you'll be borrowing all that much extra. Will the new home make a difference to your lives do you feel? We spend a lot of our time in our homes so I do think it is worth it sometimes.

It depends how fun a life of making ends meet sounds to you.

To be honest it isn’t much difference really but if you’re earning less it could be difficult. How old is your child? Soon enough they are off to school

We did this but made the additional mortgage interest only, so it was cheaper. We looked at it as though we were renting the additional space and garden.

I know people advise against interest only mortgages, but for us it worked. The majority of the mortgage was standard repayment. We figured that, if we couldn't pay off the capital after the 20 year term, we'd selll and downsize. We were buying a better property as a family home and wouldn't need such a big house 20 years later.

Then, throughout the mortgage, we overpaid each month so it was paid off. But we weren't tied to the overpaying, so if we'd needed to stop overpaying for a couple of years we could have done.

I wouldn't recommend this route unless you have a good financial advisor, but it worked really well for us.

Depends on how well a smaller house works for you, how old you are (making ends meet as you head towards retirement might not be fun or easy) and how important it is to you to cut your work hours.
If I was happy in the smaller house I'd probably do that - in fact if I had done just that I would be mortgage free now and have less stress. But it all depends on your own situation.

I guess it depends why you want a bigger house. If it is a case of need^^ because you are currently bursting at the seams and need an additional bedroom for example, that is very different to just fancying a nicer house. For me personally, I wouldn't take on a financial strain unless I really needed to and would rather be comfortable than stretch and regret it. But I am one of those boring people that saves to buy a car outright rather than hire purchase.

Whatever you decide, you need to stress test the numbers on the bigger property. Could you manage if your dh loses his job? Have you got enough spare cash if the boiler suddenly needed replacing? What if interest rates go up again? If you feel comfortable that you have the finances to cover this then go for it.

Oh wow! Thank you all for thr quick responses.

1. Daughter is 14 months so not starting school for a while
2. Current salary is £2200 a month so going part time might bring down to £1400
3. artners might be less so let's saying £1800
4. Overall bills and mortgage for bigger house will be £1506, smaller house £1280, even smaller house would be £1180
5. So monthly we would have over half our income left, also saving on childcare costs as well as i would be able to cover 2 days week

Have to move as currently in tiny 2 bed flat (see previous post on "where to move to!"), so anything is a plus haha! They are all 3 beds in fairness but the "bigger" house has scope for additional extension (but no idea when we would get the money to do this! Maybe 4 years time. Would make it 4 double bed house)

@EmmaGrundyForPM interest only addiotional borrowing sounds like a good idea! What do you think about if interest rates go up though...we are on a 3.4% fix for 4 years atm, additional borrowing is 4.93% :(