Should we stretch to a £925k house or stay within budget?

[Stansteding]

We have a house worth £515k with a mortgage (SE England) and I have £282k cash after a flat sale to bring our buying power to £800k. We’ve been looking at houses in this range but the perfect house came up which ticks all boxes (except needing painting and new carpets) for £925k. Right now we have about £1000 a month left over to save, both work full time and two small kids so I am enjoying having the flexibility and safety net of two incomes which can cover the mortgage on their own. But now I’m thinking with the enormous amount of stamp duty we would pay, maybe break the mortgage and borrow the extra £125k needed to get this house. I’ve got the mortgage in principle just now and it would be around £600 extra a month mortgage payments if we extend our mortgage by 10 years so taking us past retirement age instead of mortgage ending a few years before. I am just stuck thinking that all the £800k houses have some sacrifice and maybe we should go for this more expensive house. Another factor is we have a 5 year fixed mortgage as I never thought I’d need to extend our mortgage, but my flat did sell for less than I paid for it. Coupled with that the interest rate we got right now is good at 3.9% and would go up to 5.2% and is 1.5 years into the 5 year fixed. Really wishing I’d gone for a 2 year fixed so we wouldn’t be on the hook for £8k to break it!

I know this is a first world problem but I just don’t want to make a mistake as it’s enormous sums of money and I’ve never had this much in my life and I’m afraid of making an error we can’t recover from. But equally I don’t want to be so risk averse that we don’t have more space for the kids.

Can't you port your fixed rate and just borrow the extra on the new rate?

Good question, that would certainly make me more comfortable and would be great if we didn’t have to break the fixed rate and pay more. Our mortgage is with HSBC and they seem to do everything remotely so have a phone call booked for Thursday. I could try going into the branch but they don’t seem to do in person appointments like they did pre Covid when we got this mortgage.

Unfortunately with house buying, the houses in the next bracket up are always more appealing, and a hundreds grand is a huge increase.

Are you happy with the thought that you ‘ll be working into your late sixties? How secure are your jobs? Is the extra mortgage worth sacrificing lifestyle?

It’s a shame you saw it, I didn’t even look at the next price range up as I didn’t want to know!

Honestly that wouldn’t be worth it for me. Maybe worth stretching an extra year, or similar sort of sacrifice, but going past retirement and £600 a month would be no gos for me.

We’re to used to thinking the low interest rates are the norm
I got my fingers burning the 80!s my mortgage nearly doubled in 12 months

Less buyers at that price point. Make them an offer. £850k?

Is it on for £925? I’d be making an offer and hope to get it for £900 if not less!

I remember when we were buying our house and all the ones we loved were £100/200k out of budget. The estate agent laughed and said yep it’s always the way. I replied surely not people whose budget is £2m to start with- but he said it’s absolutely the case.. Must just be human nature.

Hi I’m you. I stretched for the house. I still feel mixed about it. I’m happy with the house and glad we live where we do, but I do resent the extra cost.

I also worry that when I do pay it off I’ll be wanting to downsize potentially as the kids will have left home. I’ll no doubt get stung for some new bonkers tax when the time comes.

I wouldn’t, you are giving yourself very little room to save on a monthly basis, you can assume you won’t be saving anything at all for the first couple of years because that £400 a month you have leftover after the mortgage increase will be eaten up with house costs getting the new house right for you. By that point your mortgage will be coming out of any fixed term period and could go up to swallow up even more of your monthly income.

Good question on lifestyle. I guess the answer is our lifestyle wouldn’t change but our cushion of savings every month would. And if the mortgage went up it would mean our lifestyle would need to change.

i think ive accepted that I have to work into my 60s having been late having kids and not being more frugal in my 20s. it’s just I risk not being able to ever go part time if I wanted/needed.

hubby private sector, good company been there for 9 years. I’m public sector, and the higher earner, been there 10 years. Of course no guarantee but my job feels very secure.

When you say retirement age, is that the age you're aiming to retire (e.g. early fifties or whatever) or the state retirement age? I wouldn't want to be in debt close to the time I'm planning to retire and wouldn't want pressure to overpay to avoid this.

I think you’re right. Make an offer that works better for us and see what happens.

State retirement age unfortunately.

Ohhhh. I'd need to think carefully about that one and I'm usually all for buying the best home you can afford even if you have to stretch yourself.

it is so hard these choices isn’t it! That was also my thinking that in 20 or 25 years we can downsize. Also because my parents now watching them deal with downsizing in in their 70s they are barely managing yet they were fine in their 60s to move house but had no desire to downsize then as no need.

Yes it’s a tough one, especially as my husband is older and earns less so realistically it will be more on me to get it all paid.

I had this choice near25 years ago and we didn’t stretch which I’m glad about now. I’ve never regretted it. Having the disposable income to enjoy life, holidays, kids clubs, days out, new dress when I see one I like, fancy gym. That sort of day to day little enjoyment is not to be sniffed at. Never mind the potential now for inflation to keep going up, energy bills, food prices, etc.

i certainly would not want to be taking a mortgage past retirement age.

Are your kids past childcare age now? Because once they’re past that I think they get more expensive as they get older. I’m currently paying student DD’s rent at 1k a month! But before that it was clubs, school trips, hobbies.

personally if I could find a house which ticked boxes at 800k id buy that, put the money in savings and try to pay the mortgage off earlier/retire a bit earlier. I do like having that safety buffer of savings.

Assume interest rates will go up.

It’s a hell of a stretch.

What is “perfect” about this house and what are the compromises you feel you would have to make on the other ones?

I wouldn’t do it. The cost of living is continuing to worsen and I wouldn’t be prepared to reduce our standard of living. £1k a month sounds like a good amount to save, but is that really after budgeting for the MOT and service for the car(s), all the birthday presents you have to buy, holidays and meals out? Or do those things come out of the savings?

It is rarely ideal to live in a huge house when you’re old. It sounds like you’d be retired and therefore probably at a prime point to downsize just as you pay it off.

I am 34 with £100k to go on my mortgage and about 15 years left. I could get a bigger house and/or garden. But it’s not worth the extra cost to me each month. I’d rather be mortgage free by 50, if not before, and aim to go super part time at work/retire early and enjoy a slower pace of life. Not everyone has the same priorities as me, but early retirement dreams are long gone if I increase my mortgage.

This was us. Stretched for our dream house having had a much smaller house with an affordable mortgage. Really love living here but it’s definitely a lifestyle change as we have way less disposable income with the humongous mortgage so no more deliveroos, cancelled PT, fewer clothes, weekends away etc. Obviously all luxuries rather than essentials but it has been an adjustment and I do sometimes miss the financial freedom we had before. We’re also locked in beyond retirement…

It’s the need to (rather than wanting to) work right up to state retirement age that would be the deciding factor for me.

Do you both have jobs that you could physically do until you are 68? What happens if you have any health issues? Are either of you likely to inherit a significant amount of money (obviously there are no guarantees with this one)?

I don’t think I appreciated just how different I would feel in my late 50s compared to in my 40s. Ten years ago I would have said that I was going to carry on working forever - now I am looking at when I could feasibly retire. No health issues but it would be nice to have some time with DH and we couldn’t even contemplate retiring or cutting back if we still had a big mortgage.

Usual advice is to buy the most expensive house you can afford to as you benefit from the percentage increase in value much more in the long run. But at the moment I think prices will go down, so I'd be wary. I don't think retirement age is a sticking factor, you can always sell up and downsize if you need to retire early. I don't know many people who can afford to retire in their fifties these days.

So other houses tick boxes of parking, size, garden but wrong location. If I’m right location it usually means small garden, on street parking, and a smaller house but obviosuly
location is very important. Of course even an £800k house is an upgrade on our current house in terms of space and garden but not necessarily parking or location.

i suppose in truth no house is perfect, but this one does ticks every box I have except being the right price haha. Oh also this house is detached which is why it’s pricier. I’d be happy with a semi and actually saw one but it sold so quick for £815k I didn’t get a look in. It sold the day I viewed it and I was just too nervous to offer that quickly.