What would you do?

Completely off babies topic! Probably going to be a ramble, but here goes.

In regards to buying a house.

DH and I have been looking for absolutely ages to buy. We've only found a couple of places we like, and both times there has already been an offer on the property that went through, so we missed out. We are in a tiny rental property at the moment, and I am desperate to find somewhere else to live. I feel like we have no room to breath here!!

We have found an AMAZING house on the weekend, but it is more than we wanted to spend. The house is brand spanking new, stand alone, has a yard. It is a high spec house, which means it is double glazed, has things like gas cooking and infinity hot water, underfloor heating. It's nice and big, 3 bedrooms plus study, 2 living spaces (though not huge), double garage. In all respects, it is a super cool house.

Unfortunately it is about $50k more than the price range we have been looking for.

For $50k less though, we would probably get a renovated 1960s house. Which means it would be nice, but no insulation etc. And we haven't really found much that has really grabbed us for months. The last place we put an offer on was renovated, single external garage, nice yard etc. But still an older house which, in Wellington, means quite cold and costly to heat.

As far as mortgages go, we would be approved for the higher price. We have about a 15% deposit, but this would be a 20% deposit on a cheaper house. A year ago we would have paid about $2500 per month in mortgage repayments with the old rates. With the new rates, on a house worth $50k more, we will pay about $2600 per month. So, it is not substantially more because the rates are cheaper. It would however put us toward our financial limit (and we run a very detailed strict budget so we know 100% where our money is going - we've done this for years!). It wouldn't really leave us much 'fat' in our budget. However, this is not taking into account anything that I will earn when I return to work in September. Anything I earn then will go towards child care, savings, perhaps a lump sum payment on mortgage etc. We'd look to fix for a longer term to give us certainty, which would take us almost to when Jackson and bub #2 (not on the way, don't worry!) go to school. DH is also likely to get payrises, but we don't want to count on that of course.

If we got the new house, I know nothing would need doing to it for many years. An older house will need more maintenance etc. Plus the increased cost of heating etc.

BUT, we would be looking at a big mortgage! And I am really scared to commit to something like that, even though we are talking 'dream home' type thing.

What would you do?!? What other things do I need to think about?

Well if you got a cheaper house with no insulation how much would you have to pay to get it up to standard? How much will you save in heating with the 'new house'?

Personally I would go with the newer one but it's easy for me to sit back and say that since I am nowhere near in your position.

I would go with the new one as well, I just think you will end up spending a tonne to get an older one up to standard plus as you say the expense of extra heating. Sounds like you have worked it out, I don't know just my opinion.

They do say it is a buyers market but I think you have to be wary of this as then buyers think that they can get houses for a song - I know we have just sold our house. In saying that if you decide to buy any house always start off with an offer below asking price, you can always increase it later.

I would go for the newer house, DH would go for the older house as he is a builder. You are right in that the older house would be more costly to heat and there could be repairs that need doing.

Also bear in mind that interest rates are picked to continue going down, possibly as low as 4% which would make things easier for you. Personally we are going to stay on floating until the rates start to rise and then fix. Our March monthly mortgage payment will be $299 lower than our February payment!!

When selling and buying I had some worries (not quite the same as yours) and plenty of people said to me that the worst thing that could happen is that we have to sell the house. If you are that good at budgeting I am sure that you would know in plenty of time that you were getting into trouble and would be able to sell the house before it came down to a mortgagee sale.

Anyway that is just my 2c worth. Good luck with the decision

I'd say offer a bit less and see how you go. I get the impression that you are a cash buyer, so that is worth a bit in itself to the vendor because they'd rather a sure thing from you than a higher offer from someone else that is conditional on them selling their house. Be prepared to walk away if they don't accept though - don't get yourself totally attached too soon, if you know what I mean? You'll be in a much better position to negotiate if you aren't too emotionally involved.

If it were me, and they didn't take a lower offer, I'd walk away. We've decided that we have enough on our plates without intentionally going out to make money really tight for ourselves. We'd rather have a bit less, and have less worries to go with it.

Can you keep looking? I know it gets frustrating, but once you find the right house at the right price, it will be worth the wait.

Good luck, I don't envy you your decision!

Thanks for the comments. Baby number 2 will be planned and hopefully about a year away. We have built that into the budget. If we bought now we would probably fix for 6 months or a year, then looking to lock in rates for a 5 year term after that.

The house is already $20,000 less than what they were asking a month ago, and we would go in $20,000 less again, with the view to move no more than $5,000 on our offer. DH would do the negotiations, and he knows our limits and would stick to them.

Neither DH or I have a DIY bone in our body, so you can see the appeal of a brand new house. We would be intending to stay there for ten years at least.... it can be costly everytime you buy and sell.

I just don't know if we should be looking at a mortgage that big. It's a hard choice!

Good luck with your decison.

Just one thing.. .You said will fix for about 5 years once the rate is down low... If you are already kind of at your limits, will you be able to afford it when it comes off fixed terms saying the rate is 8% or something..

I myself would like the new house but DH would want the old house.. He is a DIY man too

Good idea going it low and see how it goes... Good luck

Hey Laurie-

My DH and I were in the same position as you last year, and we took the more expensive option.

We are living in a home that is brand new, and is pretty much our dream home, we took the decision to buy a bigger, newer home in a more "up and coming" area than a small home in a better area, because we just did not want to move again when we had kids. (we have moved alot in the last few years)

Our vendors sold through Trademe which I think makes a difference as there were no agents fees, and they passed the savings onto us.

We too budget just like you do, and we worked it out that we would be fine as long as I only took three months off work for maternity.

All very well and good, however pregnancy has happened a little bit sooner than planned and we are going to be stretched- I come into some money just before due date and my H is getting a bonus and a payrise before then too, luckily!

Having said that- it depends on what kind of person you are.
I love our new home, and living in it, and the interest rates have definitely been in our favour, we too are floating and planning to fix in the next few months.
Now that there is a baby on the way, I honestly wouldn't have coped with buying a house that needed anything doing to it, I am too impatient and would have found that all quite stressful.

However- I am the one who controls the finances, and also have a commission based job, so I have had a few worrisome nights lately thinking about what we are going to do when the baby arrives in October, and hoping that my income stays at its current level.

I am not sure what we would have done if we had known we would get pregnant so quickly- on the one hand its nice to be living where we are, and we have more than enough room for not one but two babies....

If we HADN'T moved here, then I think we may have regretted it..

Tough one. I don't envy you, and totally appreciate your dilemma.

finally- this may be the last time interest rates are so favourable for a while, so on the one hand, it might make sense to take advantage of that.

Thanks Lady Lizard. Your situation does sound a bit like mine. Hopefully you can take some more time off work!!

The older style houses tend to have roof insulation and that's all. We live in a brand new, but tiny, rental and the double glazing makes SO much difference. We barely had to heat at all. Compared to the last house we lived in, which was freeeeeezing. Like steam breath in the morning freezing!!

I get the points about interest rates being higher in 5 years, but I will be back at work, or at least back part time by then. I am hoping to take 3 years off work after number two. Everything is assumed on DH's income. He is very, very good at his job and his field of work is very secure. So we do have that on our side.

Clearly, I want the new house! It is pretty darn close to "dream home" kind of thing. But it's a big step getting that much debt when we haven't had debt before!

As for our budget, it keeps everything we have now - haircuts, small holidays, dinner out at a restaurant once a month or so. But instead of saving, and having money in the bank, everything would go straight onto the mortgage. If disaster struck (eg car blowing up) then we might have a problem. Smaller problems could go on the credit cards (we pay in full each month), but I would of course rather not have that happen. Worst case scenario is that there is a lot of "fun" stuff in our budget that could be cut back. But we don't want to have to cut back. Cos then you'd be sacrificing quality of life for a house. But would we have MORE quality of life in a nice, new, warm house that we love? I dunno.

TOOOO hard! I am really tired of looking too. We've had our eyes open more than a year and seriously looking for 6 months without luck.