Question: My partner and I are looking to buy at the moment. I won't get into all the details but we live in Germany, have a budget in mind and have talked with a few brokers and providers.

Our idea for the monthly repayment budget comes from what we pay in rent now as well as what we'd pay if we rented a property in a similar bracket to the ones we're trying to buy. And, of course, what we think is fair for the market.

We've had various estimates for mortgage offers and many are offering more than our initial budget idea so my question is is it better to take a higher mortgage for a more 'desirable' property and pay more per month if you can afford it or to be conservative and take a lower mortgage. We're currently finding the prices are a higher than we planned.

I realise it's subjective regarding risk etc but any input on pros and cons or going closer to your financial limits (within reason) with your mortgage payments would be greatly appreciated.

EDIT: I added a little more context to a comment on an answer that might be useful extra information:

We're buying in Berlin, Germany that has had record rises in both rent and purchase prices in recent years. Seems set to continue. Interest rates are at near record lows and I've consistently had offers of around 1.5% for 15-20 year fixed rate deals. We've been advised to lock in current rates for as long as possible, especially as there is talk of a rate rise here next year. Additionally, I have been offered options for a type of income insurance for the payments. So current numbers would have us spending 25% of net income per month.

Answer: 
Two main questions you need to consider: 

**1. Interest rates**

What are interest rates like in Germany right now? You need to be comfortable with the payments at the current rate and also at potentially up to as high as 15%. As a VERY rough rule of thumb, every 1% on the interest rate means an extra $100 / month / $100k borrowed (using $ as a "generic currency" symbol). Even if you get a fixed rate product for 5 years, will you be able to afford the new deals available at the time that product expires?

**2. House prices**

Where are house prices in your area at the moment and what is the expected trend? You do not want to be stuck with negative equity (owing more than the property is worth) if prices falls as that makes it very very hard to move should you need to.

Also be aware that what the banks will lend you is not necessarily the same as what it is sensible to borrow - the global financial crisis in 2007/8 taught us that. Since then the banks are better about affordability checks etc. but you should still do your own "what if" forecasting - what if you lose your job, suffer a life-changing accident or illness, have a child, etc. and make sure you are comfortable with the outcomes, or have a backup plan (insurance policy etc.) in place. 

NerdWallet has a good [calculator](https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability) which classifies amounts as "affordable", "stretching", or "aggressive", you can decide which of those you are comfortable with.

Finally, also don't forget to include home buying fees (solicitors, surveys, taxes, etc.) in your calculations.
The real question that only you can answer is *why* you consider exceeding your budget. 

You write that your budget is based on what it would cost to rent that kind of property and that "the prices are a higher than we planned". That sounds like a real estate market where it simply makes more sense to rent than to buy, from a financial point of view. Now if you personally place a great value on owning the real estate you live in, and you have to increase your budget to be able to afford the kind if real estate you want, that is a valid reason.

On the other hand, if you would be happy living in something that is within your budget, there are two typical reasons to increase it:

* You think that a "more desirable" property would be a good *investment*, i.e. would increase in value more than whatever else you could invest in. This is unlikely to work out if you're already looking at a real estate market with low rental incomes, and in any case not good for diversification.
* You think you should buy a "better" house simply because you can afford it at the moment. This is called "lifestyle inflation" and is just generally a bad idea.