What would you do… Dream house vs or mortgage free

[Potatomashed]

Interested what you would do…

We own our house outright after renovating a few houses in our twenties. It’s the right size for our family and a great location but it’s always been a head over heart decision because of the layout, small garden and it’s a somewhat unattractive terrace. We did a full renovation so it’s energy efficient, warm and the inside is as attractive as it could be.

Our dream house has come on the market. We live in a small village and don’t want to move, but this is the ideal location (literally I can see it from my window). It is a gorgeous detached property which needs some work to modernise but we could live there during and feel proud of it forever… but it would require a mortgage of at least £100k plus time and money spent on renovations (which we have enjoyed in the past although we now have young kids). I’ve spent the past 5 years dreaming about this house when I walk past!

My DH recently went self employed and I am on mat leave so I don’t think we’ll get a traditional mortgage but my heart doesn’t want to see my dream house go!

I would always stay mortgage free.

There is no way I would want the stress of a mortgage.

In this economic climate, my choice is to be mortgage free.

Have you thought about the cost of the renovation work and interest rates? In the generally static property market, are you confident you could sell your home at the price you need? What you would do if you or your partner lose your jobs?

Go for it. You're in pole position. Life is your's to enjoy.

Go for it, life's too short to regret these things and £100k morthage is not wild by any means

Id never taken on another mortgage. Just a cautionary tale. I know people are saying you would regret it but depending on your age, you have to think of health. No one likes adressing and no one ever thinks it will happen to them but it does. We have a big house, mortgage the works and a few yrs ago I had a life and career changing degenerate injury. Came out of the blue, im fit healthy so I thought. Now my capacity to earn has tumbled, everyone thinks they can apply for disability but its not the case. Where this has left us is poverty. People look at us in this house and never would think poverty. Maintenence and bills cripple us. Everything cost triple what you expect. We have now sold, we are mortgage free and downsized considerably. We had savings but they have been depleted. The stress is immense. Careful what you wish for. I know people will say oh you could sell if that happened. Not so easy in this climate. Not everything that glistens is gold. Id do the maths and stress test you finances to the max before proceeding.

The country and personal economics are in totally the wrong part of the cycle to take this risk.

The economy is close to bankrupt
Interest rates will rise
Energy will rise
Property prices will fall/correct
A significant recession is looming
There is instability in the ME and threats from Russia

All of the above mean self employed earnings may suffer badly, people will have no money;
You are on Mat Leave - how easy will it be to work full-time if you have to;
The value of the house will likely fall, not provide the expected return compared to the cost of renovations;
If it's twice the size of your current house, it will cost twice as much to heat and maintain;
Childcare, renovations, bigger garden, more cleaning, etc, will make you very time poor;

You don't say what jobs you and your DH do.

It is the wrong time imo.

At present you are comfortable and your dc will have nice activities and a holiday.
Calculated risks can work well but be mindful there is a lot working against you here - one slip (injury for your DH, illness for you, SEN child, and this goes tits up in a crashing economy/recession, when you can't sell an unfinished house).

Enjoy the renovations and the dream house.
It will be perfect for the rest of your days.

If you do want to look into it I’d recommend Broadbench - DH is self employed and they helped us to get our mortgage.

Thank you this is useful!

Interesting- the later comments are much more what I was expecting people to say re the economy and risk!

So far I had our home valued which was the lower end of what we hoped- but I think realistically to sell we might have to go lower. There is always the possibility as suggested by a past poster of renting it out but I suspect there would be issues with second home stamp duty?

One of the EAs let slip that they had valued dream home for 100k less than it’s being marketed for. The EA for dream home was crap on the phone, definitely wouldn’t use that estate agents! I think I might have to sit here and wait for it the market to chase the price down as I know they’ve had very little interest at that price… and then I’ll be back from Mat leave too…

@Potatomashed If you are realistic on the price of your, how do you know the vendors of the dream house won’t be? Assuming they really want to sell of course.

Absolutely don’t rent yours out. You will pay more Stamp duty and you may well find you cannot get rid of the tenants when you need to. Renting is a minefield for occasional land lords now. Keep well away.

Theres always a risk in borrowing money but many of us to it to get something we really want for our family. We have never stretched ourselves too far and didn’t go without lovely holidays and cars, but I would not be in a terrace with a small garden if I could afford better. Enjoying my house every day and having a better living environment means more to me and the mortgage you are talking about is hardly earth shattering.

From someone still trying to buy their first: the dream house isn't the risky part of this plan, the mortgage is. Self-employed plus maternity leave is about the hardest combination to take to a lender, so before you fall any further in love I'd speak to a whole-of-market broker and get a real borrowing figure, not a hopeful one. Some are much better with self-employed cases than high-street banks.

If the number works, I'd do it. You can see this house from your window - if someone else buys it you'll walk past it every day for twenty years thinking about it, and houses like that in a village you love come up maybe twice in a lifetime. Renovating with young kids is genuinly grim though, so be honest about which bit of "we enjoyed it in our twenties" was being twenty-something without children.

And if the number doesn't work, grieve it properly and then stop walking that way for a bit. Mortgage-free in a warm house you've already made lovely is not a consolation prize, it's most people's finish line.

If this is the house you’ve always wanted, and you can fairly comfortably afford it, I think you’d regret not moving.

Self employed is no issue if there’s 3 years books showing sufficient drawings for a mortgage. Ditto maternity leave - she’s got a job! Not sure what is needed to secure the house after negotiation/condition survey, but millions of people are self employed!

go for it - you could pay that back pretty quickly and have the house of your dreams

This 100 times

You haven't said how old you are or what the £100k LTV would be. As you have young children you could be anything from early 30s to early 40s. Costs such as childcare ie nursery when you return to work will also impact your affordability checks.

I think the recently self employed and on mat leave are going to scupper you on this. We have used London and Country in the past for mortgages when Dh was employed, then self employed, then employed again.

I think you should consider how much time it will take away from family life, not just the physical renovation but the mental load and research. We have renovated 2 houses, one easily and this one over a long period of time because we have children and didn't want to spend all our free time grafting for the house.

I would speak to a mortgage advisor first. London and Country are free and recommended by Martin Lewis from Money Saving Expert.

Post says recently self employed

@Roselilly36 Oops! Missed that. No chance then. Three years is normal requirement. DH was self employed and DD is too. DD had very decent earnings though and was a good bet for the future. Just starting out is problematic. I’d have increased the mortgage before going self employed and moved sooner.

You only live once! Go for the dream house you one regret it but you will regret no buying it and watching the new neighbours living there

Yes I think you are right about the difficulties of renovating and maintaining family life… my husband is a real grafter who can’t sit down if there are jobs to do so I suspect it might lead to us losing having a present dad for a while…

We are mid thirties. The house price we would want to pay is about 450-475 and our current house would sell for 375. Dream house is currently listed for significantly more but it’s not had much interest, is about to be empty (current tenant leaving) and the other EA valued it at 475.

Husband’s self employment involves working with a single firm as a sub contractor. One of the guys he works with is employed with them so that may be a possibility because my employed job isn’t full time as I also run a business on the side!

This is what I meant about LTV, you want to borrow £100k and the house is probably worth £450k plus. It isn't like you were looking at a 95% mortgage.

Dh and I are both really confident DIYers. The only things we won't do are plastering, roofing and any electrics that require regulations. The work is shared between us, it wasn't me being left with the children all the time whilst Dh got on with stuff.

It does eat into your time and I bet there were many nights before where you worked into the evenings whereas now you probably can't because you are both tired from work and parenting plus you don't want to wake your children.

We had a schedule for weekend work so Saturday was a working day but Sunday was always left free. Then every 3rd or 4th weekend was completely free of work. All the housework was done by me in the week as I was a sahm so that also helped.

That house was done relatively quickly, this house was bigger, needed more work ie an extension so it did take a lot longer. This is house number 5 for us. It did mean we lived with things we hated for a long time because we prioritised spending time together as a family. It goes so quick, it doesn't feel like it when you are in it but when you are out the other side and your children are adults you look back and wonder where it all went.

I think you being mid 30s puts a different spin on this and I would absolutely go for the dream house. That is exactly what we did.