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Is it wise to increase our mortgage?

(21 Posts)
Headupshouldersback Tue 07-Aug-18 08:38:57

Looking for a little outside perspective here please as I don’t really discuss our finances with friends/family.
We have just had our house valued at £480k and we have a mortgage of £85k on it and a loan of £8.5k. We pay £837 a month on a fixed rate mortgage that ends in jan and have 10 yrs left. The loan is £137 a month with 5 yrs remaining.
My husband earns £38k a year basic but has benefits and guaranteed overtime which brings it up to between £46-50k a year.
My husband is 55yrs old and I’m 43.
We have £3k in savings.

I left my part time job in May and plan to start job hunting in September. I’ve only ever earned around £6k a year in minimum wage, part time jobs since having children.
Our kids are now teenagers.

We are thinking of moving to a bigger house just up the road.
It is just outside school catchment so you get a lot more house for your money. Catchment doesn’t affect us anymore now the kids are both in their high school.
We live in a good house that meets our needs but the new place is the sort of place we thought we’d never achieve.
It would entail borrowing an extra £28k -most of this is stamp duty. We would probably live there until the kids left home then downsize to supplement our retirement.
Are we silly to increase our mortgage in this situation? I’m worried that I’m not earning and my husband is running out of earning years.
I have no pension ( I earned decent money before kids, bought a house at 22yrs that gave us the good start. But I’ve lost confidence in my earning potential since being out of the game for so long)
My husbands pension pays £42k lump sum and £1600 a month at 60yrs.
Are we mad to do this? Should we just sit tight and live a bit more comfortably here once I start earning?
Any thoughts appreciated. My mum died a few years ago and I miss her advice!

Temporaryanonymity Tue 07-Aug-18 08:43:29

My initial thoughts that your repayments are high. My mortgage is £130k and I pay £695 per month. Are you overpaying?

HappyHedgehog247 Tue 07-Aug-18 08:45:16

Your mortgage seems high so think you can make savings there.

mrs2468 Tue 07-Aug-18 08:45:41

I also agree payments seem high on that loan to value. Your fixed rate percentage must be extremely high. Have you looked on some providers websites to check what new repayments would be as you might find they will be the same or even less.

Headupshouldersback Tue 07-Aug-18 09:50:54

Hi, thanks for your replies, we are fixed at 1.86% until January.
I was looking at rates last night and realised we are paying quite a high rate but we are tied in.

Outnumbered99 Tue 07-Aug-18 11:20:50

Mortgage seems ok to me tbh- 85k over 10 years is 8.5k in payments a year even with no interest at all!

I'd be tempted to say go for it would new mortgage be over same term as current one or would you be looking to extend it? Either way affordability/ lending into retirement not an issue although I am assuming you have or will have adequate insurances in place to cover the additional sum

BarbaraofSevillle Tue 07-Aug-18 13:56:04

1.86% is an excellent interest rate, not high at all.

Is your current house too small for your needs? You also mention downsizing in future, so another potential lump of stamp duty to pay.

Is there any scope to extend or improve your current house? Might be a less disruptive and better value way of changing things? The £28k you are talking about spending (plus any further stamp duty you would pay if you moved again once the DCs had left home) would go a long way towards financing an extension?

Dowser Tue 07-Aug-18 15:00:28

Do you need a bigger house?
I’d be getting rid of my mortgage ASAP

Headupshouldersback Tue 07-Aug-18 16:20:36

Hi,
Thanks again for your replies.
Our house does meet our needs, we have already extended out the back and on the side.
It’s a large 4 bed semi with 3 receptions, 2 bathrooms, integral garage, off road parking and a 100 ft south facing garden. It’s in a little cul de sac and in catchment for really good schools. The School catchment is what pushes the price up.
We got new neighbours last year in the semi we’re attached to. They’re not especially noisy but we’ve never lived next to a young family before (we were always the young family!) but we do hear them and the street has a lot more cars in it than 13 yrs ago when we arrived and it feels quite built up.
This prompted a little look around.

We realised that if we moved out of catchment we could get a detached house with en suites, more off road parking, quieter street and a more manageable garden etc for roughly the same price as ours.
We looked at a few, some were £80k less than ours ( detached, but only 2 receptions and parking for 2 cars) and we could almost wipe out the mortgage.
However, I like to think that all the mortgage payments we make are like saving cash for retirement when we downsize.

Then we spotted this house and it’s really big with off road parking for 6 cars, 3 bathrooms upstairs etc (great as kids get older) but it’s on for £5k more than ours plus all that stamp etc
It’s a great house but we would probably want to update the kitchen and bathrooms in time and I wonder whether it would be more sensible to stay put and have holidays etc
I really appreciate your comments, thank you smile

InDreamland Wed 08-Aug-18 22:39:36

It sounds to me like you have some doubts and anxieties about increasing your mortgage at this stage because you're here asking. Everyone is different, some like risk and others (like me) are risk averse and hate having any debt (including mortgage).

I was going to ask the same questions as a PP - do you need a bigger house? Could you invest in improving your current home rather than spending on removal costs, fees and stamp duty?

Don't think you said how old your teens are, late or early teens? Do they have/need uni funds/support if going on to higher education? Would this impact on what you could afford on a mortgage in the future?

Personally I would focus on paying off the loan and mortgage asap rather than increasing how much I owe if not really necessary. Like I said though I am risk averse (boring) and don't like having any debt - looking forward to being mortgage free in hopefully 7 years by the time I'm 45 by overpaying each month with my DH.

All that said - on the flip side my parents were managed to achieve mortgage free status then when they were at your stage in life decided to upsize and take out a mortgage again when they didn't need to but just fancied a change. However, they planned that they knew they could pay it off in around 5 years because they had guaranteed lump sums coming in over those few years and at the time both had full time incomes.

Do what you feel you're most comfortable with and won't stress about affordability.

flapjackfairy Wed 08-Aug-18 22:48:08

Personally I wouldn't bother. Your kids are well in the way to adulthood and you will have to move and downsize again . Is it worth the.hassle ? Only you can answer that one .

flossietoot Wed 08-Aug-18 22:53:46

You only have 3k in savings and no pension and you want to increase your mortgage with not that many years left until your husband retires? Plus pay a big amount of stamp duty?? I am by no means a finance person but seems a bit risky.

SassitudeandSparkle Wed 08-Aug-18 22:57:53

Firstly - your ages make make the mortgage a little more expensive, we had a mortgage for a short while in our mid to late forties and there were some companies that were not interested!

Secondly - will you downsize eventually, because you seem to be doing the opposite now. Admittedly you still have the teens with you ATM, but it's another move and another stamp duty, legal fees, all the various costs that you run up when moving ...

Would you go for another fixed-rate, because I wouldn't have thought the rate is likely to drop tbh?!

Coolcool Thu 09-Aug-18 06:15:50

I wouldn’t do it while you are out of work.

user1471426142 Thu 09-Aug-18 07:10:38

There is quite a lot of pressure for your husband to continue working already given the mortgage amount and his age. Do you have income protection insurance? The extra might not make a huge difference to the payments but would add to the pressure to carry on.

I don’t think do it unless you were working and building up income but some of that depends on how to want to use the pension and your husband’s plans for retirement . Would you expect your husband to retire at 60 and pay the mortgage from pension? If you increased monthly payments, would that give you enough to live off? Also would you be happy to use the lump sum to pay off some of the mortgage or would you want to use it for other things? Do you think you’d work more when he retires to make up the difference in income or would you want to be able to spend time with him?

BasicSAHM Thu 09-Aug-18 08:08:05

I would focus my attention on future downsizing plans and retirement planning. I understand the desire to have your dream home but wouldn’t a more comfortable retirement and financial wiggle room make you happier in the long run?

Headupshouldersback Fri 10-Aug-18 21:48:23

Thanks everyone, you have all make a lot of valid points and have been enormously helpful in achieving some clarity.

Something we honestly hadn’t thought about (and I’m embarrassed that we hadn’t considered) was the fact that when we downsize after the kids leave we would be paying stamp duty and all the fees associated with moving all over again. Doh !

I am quite risk averse and I hate debt, my husband hates the thought of all that stamp duty.

We’re thinking it’s better to stay put for now.
There is probably more to life than a fancier house and a bigger mortgage!

After the summer holidays I’ll start job hunting and put a bit more money in the bank.

My husband is planning to work until 65yrs to help get the kids through uni (if that’s what they choose to do) or help them get started in life.

We will move eventually, when the kids leave we want to cash in and move out of the catchment, not necessarily to a smaller house but even this place would be £100k cheaper 1 mile out. We have considered doing this now but because I don’t have a pension we think it’s better to keep paying the mortgage for the next 10 yrs and then sell up.

If anything crops up, illness or tragedy or we just think it’s a good time we always have the option of moving further out and cashing in.

I want to make sure we have a reasonable standard of living along the way.

When I was growing up my mum looked after the pennies so carefully ( she used to only buy second hand clothes and cut her own hair) but we did live in a nice house.
However she died not really having enjoyed herself much, saving had become such a habit. She left everything to my dad (who just after her death won £76k on the lottery and then inherited £500k from a relative he’d never met)
My dad promptly married a lady (same age) who was penniless and living in a caravan. She’s enjoyed a life of 5* luxury ever since, brand new cars x 3, new house, holidays, private health care, jewellery, clothes, made to measure everything, M&S food shopping etc
She literally laughs in my face and says she’s spending my inheritance. ( I just laugh along and say “good for you!! too right!” ) all the while I’m feeling ever so sad for my mum.

So in her absence I’ve been very grateful for all your sound advice, thanks you lovely lot 😊

swingofthings Sat 11-Aug-18 09:05:15

OP, I think you've made the wise decision consdering the age of your husband, not that he is old, just that he is getting closer to an age he might want or need to retire. OH and I have just paid our mortgage turning 50 and I cannot tell what a deliverance it is. We overpaid for years to do so and at times, I too was tempted to ease off, enjoy the money and just extend the length, but OH was adamant he wanted the mortgage paid asap and he was absolutely right. We now have some freedom and choices, and of course the extra disposable income, this is priceless.

Throwing all this money in tax just to have a massive house you don't need seems a massive luxury.

Ta1kinpeace Sat 11-Aug-18 18:16:49

Stamp duty is a significant factor in moving house
its one of the reasons the market is grinding to a halt
BUT
I'll go against the grain here

if you can move to the bigger house and still be mortgage free in ten years, go for it

Babelange Sun 12-Aug-18 09:11:02

Just to say that my DF did something similar (except didn't have a big lottery win). I am protecting my DCs with my will - as lovely as my DH is, financial savvyness or wariness not being his forte.

lovingmatleave Tue 14-Aug-18 22:56:29

You sound like you are in a great housing position - big enough, popular area, good amount of equity. So definitely time to start building up your pension and household savings. You've got a long way to go to receive your state pension and I would never like to rely on spouses pension (you never know what might happen).

I appreciate you see your mortgage payments as like saving for future, but who know what will happen with property prices? The cheaper areas might rise in value then your plans to downsize might not leave you with the option of the kind of house you want that would release enough cash for you. And your kids might be with your for years and years and years - although at least they could contribute then to your household income

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