Cold feet or wake-up call?
March 3, 2020 10:45 AM   Subscribe

About to buy a house but afraid we're making a terrible mistake if we go ahead - and a different terrible mistake if we don't. Can you help me separate fact from feeling?

We moved out of a big city a year ago and relocated to a new area in order to be able to afford to buy a house. My husband started a new job and is really enjoying it. It's well-paid, has a great development path and is very secure. I stayed in my old job, living in the city Tue-Fri then returning 'home' to new area at weekends (working from home on Mondays). It's not ideal but needs must.

We intended to rent in new area until I was also settled in a job, at which point we would buy. We have no debt or dependants and decent savings so expected to find housing in our range fairly easily, but it turned out to not be the case. Rentals are difficult to find here and houses for sale even more so. It also sucks to not be together during the week.

So we were thrilled when our landlady approached to ask if we want to buy her house as she'll be selling when our current lease is up in June. We like the place so we had it appraised. It is about £50k more than our original budget, and it needs some repairs and updating, all of which we can currently afford within the initial term of the mortgage (five years) IF I continue to be employed. It is a good buy for the (highly desirable) area so we'd have likely have little trouble selling it. We've been viewing other houses for a year and nothing has come close to this one - it would likely go for much more on the open market.

However the mortgage that we have been pre-approved for is about a third more than we currently pay in rent and it needs some modernisation. Although manageable now we might struggle with the payments after the initial five-year term if interest rates go up more than a few points and we can't refinance at a lower rate or we can't sell (eg Brexit trashes the housing market etc). The works that need to be done are not insubstantial - we have savings to cover the amounts quoted it but it will wipe the majority ofour existing nest egg.

On the other hand no house is perfect and I am 45 and have waited a long, long time to be in a position to purchase. I am sick of moving, renting and being unable to build equity - especially when I been saving so long in order to do this. If we buy I will stay in my current job until I get a new one - but I will be more motivated to apply for jobs I may otherwise not have considered in new area. Husband is 8 years younger and sees his career trajectory rising (along with pay). He thinks we can make this work, if I want to.

I however am terrified. I am very worried about my employability. I have had a couple of interviews and one early offer - salary was too low - but I haven't found anything permanent yet. I will admit that I am being picky. Wages are considerably less for me in new area, and opportunities in my preferred (and much loved) field are rarer than we realised. I'm worried about struggling in my existing job - the insecurity of our current situation is making it difficult for me to focus my effort and attention at work and I'm paranoid about how I'm falling short of peers as a result. I'm also middle-aged and a bit jaded in an industry that favours ambitious 20 & 30-somethings - something that will only get worse as I age.

If the house weren't being sold my honest preference would be to hand in my notice in current job and look for contract and temp opportunities in area B - there are many more of these roles available - or even work on a career change on the assumption that we could continue to house hunt for something cheaper and buy when I'm established.

But that would mean we have to find another place to rent when the lease is up on this house so we have no idea where we'd end up. It would add - at minimum - another year to the house-buying time frame. We'd be itinerant (again) for the forseeable, and that 'better' property might never transpire. And we'd be passing up this house, which could be a great investment and in which we could happily live in and work on for the next five years or so.

tldr: buy now, solving immediate problem but potentially create future trouble, or pass it up and risk never settling at all.

Option a) is terrifying to the point of paralysis.
Option b) is depressing to the point of hopelessness.

We're in counselling (and we are very much a team) but that is more focused on feelings than practicalities, so I'm putting it to the hive: what would you do?
posted by socksister to Work & Money (16 answers total) 3 users marked this as a favorite
 
I know that owning a house is a thing for you and I totally get it. What region of the UK are you in, if you don't mind? I feel like you really need to get granular on this decision because of the (extra) cost involved, it's not an emotional one by any means.
posted by teststrip at 11:00 AM on March 3, 2020


I don't think it's unreasonable to be anxious about any large purchase, but it also sounds like it makes sense to buy this house. There are a lot of unknowns, yes, but that's true whether you buy or keep renting (in fact, the unknowns are probably reduced if you buy). You all moved there so you could buy, and a house you like is available at a price you feel is very good. It sounds like the worse case scenario is that it takes you a while to find a job there, or the mortgage is too high in five years. You can manage those situations if they happen. f you move into another rental, will you still want to buy? Then go ahead and buy.
posted by bluedaisy at 11:01 AM on March 3, 2020 [3 favorites]


I am risk-averse on major purchases to the point that I didn't buy a home until I was 48. I just bought my second house with my partner at 49, despite generally feeling many of the feels you describe in this post.

If you think you can sell this if absolutely necessary, you've accounted for all likely and predictable risks and feel that this house is your house, buy it.

Maybe you're making a terrible mistake, but better the mistake you made than having the regrets that you didn't take a chance at all, IMO. If your partnership is strong, I say go for it. I am pro-house. Good luck whatever you end up choosing!
posted by jzb at 11:03 AM on March 3, 2020 [6 favorites]


Realistically you will never make London wages outside London, barring a few industries. So I think you need to plan for that and if it makes buying this house too expensive, then it does and you can't change that.

Personally I think that affordable housing is one of the if not THE key to happiness and a long life so I'd be reluctant to purchase a house that is at the top of the budget and needs repair. Also don't underestimate the nightmare and money pit that is renovations.
posted by fshgrl at 11:48 AM on March 3, 2020 [3 favorites]


I see two main worries in your post. The first is that Brexit might drop a grenade in the housing market. The second is that you might not be able to make payments if interest rates go up.

(I'm not sure what you mean by your mortgage needing "modernization")

These seem like general house-buying concerns and not necessarily anything to do with this particular house. Brexit will do what Brexit does and unless you specifically budget to buy a house that you can afford on just his salary, you are always going to need your job to make ends meet.

What I'm saying is, the decision appears to be between buying a house and not buying a house, not buying a house now or buying one later. Does that make the decision easier?
posted by It's Never Lurgi at 12:28 PM on March 3, 2020


If you buy the house and your worst-case scenario happens in 5 years (high interest rate spike, Brexit trashes the housing market) could you rent the house out and use the income to move you and the significant other move into a smaller more affordable apartment near your jobs/future jobs? (You said it was hard to find rentals in the area so presumably it would be easy to rent out) I live in Florida where this sort of thing is relatively common given the strong demand for rental housing in most of the coastal cities.
posted by caveatz at 12:44 PM on March 3, 2020


The choice between "buy now" and "wait to buy later" is pretty straightforward: now is as good a time as any, interest rates are at historic lows, and house prices will continue to rise while the UK remains a small island with increasing demand and constrained supply. So if buying is right, don't wait.

But you do have a real choice between "buy this house" and "it's too big a financial commitment, buy cheaper". Could you still afford your mortgage if, at the end of the fixed term, rates rose not just to the lender's standard variable rate, but 3 percentage points above it? That is the stress test used by lenders. I guess if you have only been "pre-approved" (i.e. have a Decision in Principle) then you won't have been assessed against the stress test yet?

I'm confused about how your mortgage payment will be a third lower than your rent. To be clear, is it the same house as you're currently renting? If so, you're getting an incredible deal on your rent, as my understanding is that low interest rates mean mortgage payments tend to be significantly lower than rents, not a third more!

Finally, you need to check you're happy you'll still be earning enough to fully pay off the loan i.e. will you still be earning a salary at age 70? (Based on age 45 now plus 25-year standard term).

Is there any world in which you could afford to buy a liveable house on husband's salary alone? That would be a much more comfortable situation.
posted by matthewr at 12:45 PM on March 3, 2020 [1 favorite]


By the way — for US answerers — it is important to understand that in the UK, when you take out a mortgage the rate is only fixed for a short initial period (e.g. 2-5 years, 10 at the very most) and after that it reverts to a floating rate. US-style mortgages with fixed rates for the whole life of the loan are not available here. That significantly changes the balance of risks you're taking on when you buy property.
posted by matthewr at 12:49 PM on March 3, 2020 [6 favorites]


Would you have an option to rent out a room if you need to bring in more cash at some point to pay the mortgage? Is your partner on enough of an upward trajectory at work to maker it feasible you could make mortgage payments based only on his salary in future,?
posted by hazyjane at 1:36 PM on March 3, 2020


if you don't buy the house you'll have to move, no? what's that going to look like, affordability wise? Moving expenses, hassle, different rent payments, different commute, more uncertainty.

The house may be a bit of a financial stretch now but locking down a residence at your (our, I'm just past 50) age makes a lot of sense. I say do it and if circumstances change deal with it at that time. Otherwise it seems like you'll be fine if a little skint for a while until employment settles? Nothing one can't handle with a little belt tightening.
posted by seanmpuckett at 1:49 PM on March 3, 2020 [2 favorites]


Apologies if this isn't how it works in the UK, but just because your landlord is offering to sell her home to you for 50K more than your budget, doesn't mean you need to buy the house for 50K more than your budget. It is far, far easier and less expensive to sell your home to someone you know without realtors, than it is to put it on the market. You are in a great position to offer to buy it for 20-30K less and see if she bites. Would that make your issues less worrisome?
posted by Mchelly at 2:03 PM on March 3, 2020


Lease is up in June. Owner is motivated to sell. A few options/possibilities to suggest:

Buy in September, after you've had a bit longer to save/assess.

Rent for one more year, buy then if she can tolerate the wait.

Get a boarder/roommate now to help offset costs.

Save every penny between now and sale date. Make a game of eating beans and rice, finding the cheapest commuting options, staying in the city some weekends to save on those travel costs if that is actually a savings. Go on only free dates. Both of you pick up babysitting gigs or whatever additional paid work is available to you.

Discuss this purchase with a fee only financial professional. There may be options available to you that you haven't heard of/considered. There also may be concerns or pitfalls that you haven't considered.

(I would not buy this house, if I had the concerns you list. I would want to feel pretty sure that I'd be able to handle a higher interest rate, and I would want to make a purchase that would not totally deplete a nest egg, because unforeseen repairs would be a potential disaster in that case.)
posted by bilabial at 2:13 PM on March 3, 2020 [1 favorite]


Response by poster: (I'm not sure what you mean by your mortgage needing "modernization")

Sorry - that's an error from typing a wall of text! The house needs modernization, not the mortgage.

Also, to clarify on a couple of other questions:
- mortgage vs rent - the monthly mortgage payments would be 1/3 more than our current monthly rental payments. Our mortgage application is currently being stress-tested against interest-rates going back up, but assessments are based on current earnings I assume so not sure how that will help us decide whether this is too much?
- will I be working for length of mortgage - I very much want to want to, but I can't imagine that I will still be earning as much in my 60s, so the assumption is we try to build as much equity as possible to prevent that scenario, or we sell earlier.
- buying with only husband's earnings - unfortunately not possible in our current region.
- rent there another year - No, homeowner is putting the house on the market in June and wants us out if we're not buying.

(I will bow out now, but thank you so much for answers so far - it's helping me think things through).
posted by socksister at 2:18 PM on March 3, 2020


I would see about renting for another year from her and waiting - if coronavirus tanks the world economy all sorts of things will shift. A good time to not decide.
posted by leslies at 2:20 PM on March 3, 2020


It is a good buy for the (highly desirable) area so we'd have likely have little trouble selling it.

This is very hard to judge, people buying expensive houses often have a shortlist of essential features, if this house is missing any of those 'must-haves' it may be much harder to sell then you think. Given that you have only been there a year, it seems very likely the landord has previously tried to sell it and failed.

A common pattern is to see a village where 4 and 5 bedroom houses get snapped up for huge prices, but a pretty 2 bed cottage just will not sell. The reason is that smaller families all want to live in the city and the younger generations are completely priced out.

This does not mean the landlords offer is a bad one, but I think she is making you a fair offer not a bargain. I would only buy this if you are confident this is where you want to live for quite a few years.
posted by Lanark at 3:34 PM on March 3, 2020


With everything you've said it's hard to imagine your being worse off a few years from now, no matter what, if everything else in your life is the same or even if not as good but you have some equity and an appreciating asset instead of none.

In other words, buying is actually some insurance against the things you're afraid of (employment changes), which may not even come to pass.
posted by Miko at 6:14 AM on March 4, 2020


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