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.

We stayed in a much smaller house than we could afford and we have retired early but even if we could not have done so there was great comfort having a huge margin for interest rate hikes.

yes you are right, I think this house is overpriced and prices are coming down a bit so no harm in waiting for the right house in my price range without stretching

Probably the best move at the moment.

Yes the interest rate hikes are the danger, a mortgage is a 30 year commitment., you want to get the house as cheaply as possible.

Have you looked into part and part mortgages ?

I probably would but get the facts and figures from
tje mortgage advisor

can the larger house accommodate a lodger
if needed?

A lodger can be a MASSIVE drag on quality of life if you get the wrong person. A lot depends on what you are buying, when and where.

https://www.reddit.com/r/HousingUK/comments/1u34vii/has_anyone_ever_taken_a_massive_loss_on_a/

I wouldn't/. We bought a house well under budget so that we can afford it on one salary if need be. We have lots of spare cash for holidays etc and never worry at all. Yes, we could have had a nicer, bigger house but life is for living and you can always go bigger and bigger and bigger and never be happy.

My sister and her husband have massively over stretched themselves to buy a big house and they worry so much about money despite being higher earners than me. I don't think the trade off is worth it.

Is the plan to pay it off before then? I’m just curious. We have a slightly larger mortgage but set it to run to about 63 ish I think. Which means much larger payments when in the expensive childcare phase.

OP we did stretch, and so happy with the house. It’s a great location, the garden isn’t big but big enough and the kids love it (4 and 2) and are out all the time. But, our mortgage went up by £1500 a month with the interest rate rises and it’s been more of a stretch than we thought. We would struggle now if either of us lost our job

OP - having looked at other properties in and around the 800kish price point and looked at this one, can you see the extra value. Forget what you can afford, what would you happily pay for it? Is it over valued, under, about right. That my basis for any offer. Then you can justify it to an agent and vendor. I am offering £xxx because xxxxx Then it is neither cheeky nor insulting and keeps the door open.

There is no reason why you can't offer £860 and settle at £875 for example if you have a solid basis for saying that's what you believe it is worth and why.

Edited to say: That's then a different financial proposition for you and one that would sit more comfortably once you add in your moving costs and so on.

Around 12 years ago we considered staying in same area and massively increasing cost of house & mortgage to get a bigger house with a garden (we previously only had a patio) - but we decided to look farther afield, and also factored in secondary school choices (which are only 3-4 years away for you). In the end we moved 3 miles further out (to the edge of the Borough), which meant we could buy a much bigger house with garden, but without having to extend mortgage too much (as houses were much better value a bit further out). And we also moved into an area that had a much bigger choice of secondary school options. As we only moved 3-4 miles, I kept my existing friends, and we kept the dc in their existing primaries (so a bit longer school run in the short term until they had all left primary - but you could get your 3 year old into a primary closer to the new area, and use some wraparound care to manage the school runs until the eldest has left primary school if it works better.

One other option is to find a house with a bigger garden at the lower budget, that you could potentially extend to provide more bedrooms etc, over time.

I would not do this in your shoes OP. £400 a month for incidentals is nothing. Just think it would take 2 odd years of saving that just to replace the flooring and redecorate the new house. And taking you to state retirement age? Absolutely not. We recently bought and chose to go for a shorter mortgage term so it’ll be paid off by the time we’re 61, and we have £800 a month left over after all costs. We don’t even see that £800 at the moment. There is always something new to buy and something to sort in the first couple of years of buying a new house, you cannot assume you will be saving that for a long time yet.

Who knows really. Our plan is to put any inheritance we receive on it. Or we might just downsize when we retire or want to wind down. It’s not really something we worry about too much.

I don"t think they have sold their house yet, they need to do that first, but I think it is obvious that over-stretching in this environment could be a disaster.