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some advice re: mortgage borrowing please!

(5 Posts)
Becaroooo Wed 06-Jul-11 22:29:45

Dh and I want to move (long story).

Have lived in our current home for 12 years but I have never really liked it, despite all the work we have done to it over the years. It was a bit of a rush decision to buy and I regret it.

We have sold to a no chain cash buyer BUT the only house we can find that is suitable we would be lucky to get for £175k.

We have always been risk averse (to our detriment sadly) and although our sale will give us a deposit it will mean going back to a 25 year term (fixed rate for 5 years)

Our income is £50k pa (dh works I am a SAHM)

We have no loans/car finance/HP etc and owe about £1k on the credit card so only other outgoings are food/utilities/petrol etc

So.

After mortgage repayments we would be left with approx: £1600-1700 per month to live on.

I am hoping to go back to work in a couple of years after ds2 starts school to help with finances.

Are we mad??? Its such a lot of money (out 1st mortgage was for £54k!!)

It would be our home for the forseeable future...say the next 15 years at least!

I worry about interest rates (although we will be on a 5 year fix initially) and I worry that if interest rates go up to 19% like they did in the late 80s-early 90s we would be stuffed....

Advice?

CogitoErgoSometimes Thu 07-Jul-11 09:46:11

You're not mad. A disposable income of £1600-ish out of a salary of £50k (take home around £2500/month?) sounds very good indeed. You may have to forego fancy foreign holidays or other big-ticket expenditures for a while, perhaps, but if you're only financing bills, petrol and food, £400/week will go a long way. If you're worried about risk, the main things to check are the terms of your mortgage. If you had some spare cash, for example, can you pay something off the capital without a penalty?

I don't think anyone is seriously predicting that rates will increase to the silly levels of the early 90s. 5% has been a good average for the last five years and the predictions are more in that area for the next five. By the end of the fixed term, your DHs income will probably have gone up with a few pay-rises, you will be earning some money as well & then you can always shop around for another fixed rate. Who knows, you may even be looking for a bigger/nicer property? Five years is a long time.

Becaroooo Thu 07-Jul-11 09:56:15

Irony is, it wont cost much more than staying here if we add 4 years to the term.

We can make unlimited overpayments and we can also pay off lump sums should we wish to.

I have been thinking the same thing re: hols. We will just have to holiday in this country and try and cut back on other luxuries.

We wouldnt be moving for a long time if we moved there!!!!!

CogitoErgoSometimes Thu 07-Jul-11 13:53:44

You're talking to someone who counts the IoW as an overseas holiday.... smile It's worth economising a little and extending the mortgage term if you get to live in a house you actually like for a change. When I moved into my current house 21 years ago, it was in such terrible nick and cost so much to put right that not only could I not go on holiday at all, but I also spent a whole year walking on floorboards However, since it's now worth about 4 times what I paid for it, all is forgiven

Becaroooo Thu 07-Jul-11 14:20:30

I love the IoW!! smile

Tbh, if the interest rates went up to stupid levels we would be stuffed if we stayed here too, so might as well be in a house we like!!!

Viewed it earlier. Owned by a house building company - its been on the market a long time - and they paid £175 for it in March. We are offering £175....hope they just want rid of it!!!

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