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Buying Houses - to take full mortgage amount offered?

(45 Posts)
GoingSlowly Tue 24-Jan-17 13:08:01

Hi, I'm just wondering how normal it is to take the full amount that your mortgage provider is offering when moving into a bigger house. I know people who must have maxed themselves out to buy a massive house, because they are now 'cash poor' and always seem to be scrimping.

I am very conservative in nature when it comes to finances - whenever I've moved house in the past I've had a figure in mind that I would like to be spending per month on my mortgage. This figure is pretty low at £500 ish. My thinking is that if I keep the payments low I have spare cash to spend on being able to enjoy life, and also save money. Often money we save is then put back into the mortgage in over-payments, to build up equity.

But I feel as if my approach is not the norm. We are about to do the last move we will ever do. As we have no pensions, I'd like to jump up to a bigger property, as the house will basically be an investment for the future. However, I feel scared to take on a huge mortgage, in case interests rates rise? When I do a mortgage calculation, the top figure the banks would lend us would cost just over £1100 per month, which for us, means we would need to cut our lifestyle down a bit and would not be able to spend as we do now. We do not have a particularly big income - I do not work so my husband is the breadwinner at the mo.

Just wondering what others do when making a choice about what size motgage to take on?

Boulshired Tue 24-Jan-17 13:55:57

It is so individual, with one income I would be a lot more cautious than I would be with two. We went for offset so we can in theory access the money if necessary and use for extensions etc and if we do not we do not pay interest, but also pay as much off as we can when we can. We only choose this one because of the equity we had.

IMissGin Tue 24-Jan-17 14:10:15

We went for what we could afford (just) on one income. Approx half what the bank offered. It still feels huge as we were late getting on ladder and went straight to 'forever' home. DP is about to be out of work for a while and while I'm nervous id be absolutely terrified if we'd taken the whole amount.

FormerlyFrikadela01 Tue 24-Jan-17 14:17:45

I wouldnt dream of taking the maximum amount on our mortgage in principle. It would more than double our current payments and just fills me with dread having that amount of debt even though this will likely be the forever house.
I also have a feeling that when it comes to applying for the actual real deal mortgage we would be declined for the full amount anyway. Which leads me to a question (sorry for the hijack) how often are people turned down after the mortgage in principle and on what grounds?

NotAPuffin Tue 24-Jan-17 14:20:22

We borrowed about two thirds of what the bank offered us. We know better than they do what we can actually afford!

Difficultyear2015 Tue 24-Jan-17 14:24:01

We have just taken out a mortgage at approximately 93% of the mortgage offer amount.

This is based on both our salaries and are in our late 20's.

I will be starting maternity leave in a few months time.

However, the mortgage is still far cheaper than the rent we were paying on a small 1 bed flat and we now have a house that is big enough to last us throughout most circumstances.

We have no other debt and generally live quite frugally (no sky tv or silly spending habits or addictions) so the mortgage seems affordable, and I have made savings to help cover any shortfall for when I am on maternity leave.

heron98 Tue 24-Jan-17 14:29:43

We deliberately kept our house buying to a certain limit, even though we could afford higher repayments and were offered more by the bank.

This meant we ended up buying in a slightly more rubbish area, but it does mean we have a lot more spare cash.

My sister and her husband who earn masses more than us really stretched themselves with their house and never have any funds left at the end of the month.

Life is for living, not for having a dream house.

namechangedtoday15 Tue 24-Jan-17 14:35:40

We took every penny of what the bank would offer us. It was the only way we could buy a house in the location we wanted (great schools, lovely area etc).

For us, by buying a more expensive house, particularly whilst interest rates have been so low, we've done very well out of it. Yes, we can't get at that money (unless we sell) but we have increased the equity by far, far more than we'd ever have been able to save and whilst its worrying occasionally to have such a large mortgage, its working for us.

Crazycatlady123 Tue 24-Jan-17 14:37:41

We almost maxed ours but that seems to be the norm round here, house prices are silly. I think it depends where you're buying, how much equity you have, and how long you're going to be working for.

We live in South East just outside M25 and we couldn't get a box of a home for payments of £500 a month, even a small place wouldn't have been enough based on just one of our incomes. We're in our early 30's, mortgage is £1,300 a month for our lovely 3 bed forever home fixed interest rate for 5 years, we're not on huge incomes but fairly comfortable and have always been good at saving. It was either that, or stay in our small shared ownership flat which was costing us upwards of £1000 with rising service charge costs.

It's always a risk with buying any new home you just have to make the best decision with the information you have at the time.

downwardfacingdog Tue 24-Jan-17 16:39:49

We maxed ours. Needed the full amount to afford a big enough house and it's no mansion. £500pm must be a pretty small mortgage? 120kish? Would only buy a flat around here and we have 5 DC so not an option. I would probably be inclined to spend as much I could afford on a house though as I value a nice home, but some people prefer foreign holidays etc. Each to their own really

titchy Tue 24-Jan-17 16:43:48

If you're happy with the home that £500 a month will buy you then stick to that - but please please please cut down some of your spending and get yourselves a pension. Living on £65 a week will be no fun at all when you're 70.

Notyetthere Tue 24-Jan-17 17:10:23

We also maxed ours with ours. South east. I dont even think you can buy a 1 bed flat in our area for less than £200k. We bought as we approved our 30s so a starter home was never going to be the way to go. Our repayments took 42% of out take income at the beginning but we have been lucky that house prices shot up after we bought that we are now about to remortgage onto a favourable interest rate which going by today's rates, we will be paying £400 less per month. Our repayments will be 24% take home pay starting in April. It has been a tight 4 years but our lifestyles adjusted accordingly, and tbh I really didn't want to move for a very long time if I could help it.

It is a 3 bed semi, not on the nicest of roads in our small town but we have been very happy here in the last 4 yrs. We are happy to be 'stuck' here if circumstances changed where we had lower incomes in the future.

adriennewillfly Tue 24-Jan-17 17:26:06

Do what you feel comfortable, but set a limit and stick within it - EAs will try to push you out of your comfort zone, so you'll need to be strict with yourself.

I'm borrowing about 60% of the maximum the bank will lend me. It's enough that one salary can just about afford to pay, and we have enough saved for us to live for around 18 months with no job.

RebelandaStunner Tue 24-Jan-17 17:55:07

We've never taken the full amount and we invest in property. We prefer to overpay as much as we can with any spare money. We've never had a mortgage longer than 12 years.
A decent size family home is still reasonable round here and we got a bargain because we weren't bothered (in fact we were happy) about the smallish garden.
We are quite big spenders on nice food, clothes, going out and holidays and would hate to have to cut back for a huge mortgage.

dun1urkin Tue 24-Jan-17 18:00:18

We were a bit taken aback by the amount that was available to us, and spent nowhere near that amount, we could have bought a house double the cost of the one we did if we went to the maximum.
But as PPs have said, it depends on your circumstances and choices.
We are financially conservative in some ways (wanted to buy a house with a mortgage plus 'existing' expenses that could be serviced on one salary should the worst happen), but in other ways have a lavish lifestyle in terms of holidays etc grin

irregularegular Wed 25-Jan-17 09:38:34

There is no way I would want to borrow the amount we were offered last time I asked. It was an insane amount and I'd much rather spend the money on other things. But we are in a position where we already have a large house and a large amount of equity so there is little benefit from borrowing much. Plus my husband's income is quite variable and uncertain. I wouldn't want to be stressing about money all the time so have always borrowed quiet conservatively and paid off quite quickly. I can see that some people might have little choice but to take the maximum offered, but I would be a bit cautious and work out the implications for your budget carefully (including what would happen if interest rates or your circumstances changed)

PurpleMcPants Wed 25-Jan-17 09:41:58

We have never taken the maximum amount, but then again have been lucky enough to be on the property ladder for 20+ years so now have plenty of equity and have never needed to.
I always heard that you should budget for no more than 1/3 of your income to go on your mortgage repayments.

FrownsAndDimples Wed 25-Jan-17 10:07:34

We're trying to buy in London at the moment. A 1/3 of our income would get us maybe a porch, not a full actual house.

I think it must be different in other parts of the country or if you purchased years ago. I just can't see some of the figures mentioned up thread working on the south east with anyone trying to buy in today's market. Its all very depressing.

namechangedtoday15 Wed 25-Jan-17 10:21:57

I think thats true frowns - but I also think expectations play a part. Some people are not prepared to buy small flats or houses / in a not-so-nice area and properly scrimp and save (for example give up mobile phone / gym subscription / going out to bars / restaurants) to get a deposit together.

PlumsGalore Wed 25-Jan-17 10:25:24

After having been bitten by high interest rates in the late 80s we never overstretched ourselves with the amount we borrowed, it simply wasn;t worth it. We did however take extra loans on along the way to increase the size of the house as and when our finances were better, and paid our mortgage off 7 years early by overpaying.

I have always been possibly over cautious.

CaliNative Wed 25-Jan-17 10:36:26

If you apply for what you are actually comfortable with, you will be able to save that bit more on servicing the astronomical interest payments which would accrue on the extra capital the bank would otherwise be lending to you which will also enable you to save that much more for the long term (e.g pension, ISA, gilts whatever).

Longer term you wont worry so much about rates increasing and be able to enjoy a more relaxed, fiscally free lifestyle (which seems to be important to you).

Tigerblue Wed 25-Jan-17 10:41:27

We took approx 75% of what the bank would offer us. This was due the fact we wanted to make sure we had enough money to pay larger bills (with a larger house), still have a bit of fun money and hopefully save for a rainy day. Many years ago the mortgage rate went up to 17% (hopefully will never happen again) but you never know - who knows whether we could afford 17% but at least there'd be money from our fun money and savings to help.

Butterpuff Wed 25-Jan-17 10:48:33

We took less than half the amount the banks offered us. But in our circumstances we were planning to have children and knew that I would be taking maternity/going part time for a while so we kept our monthly outgoings as low as possible to allow us to like comfortably without worries. As it happens we are now saving quite a bit so when I go back to work full time in a few years we will have a larger deposit to put towards the next move and may still be able to get a really desirable house without maxing out on the mortgage or keeping the length of borrowing down.

TinselTwins Wed 25-Jan-17 10:52:36

I say take what you need when you can

DH and I were too risk adverse, we took the very smallest amount we could to buy a starter home at a time when our friends were taking everything they were offered and buying bigger homes than they need.

Fastforward a few years:
- we've outgrown our starter home, and guess what? all that extra we were being offered and turned down, well we're not being offered that any more so we can't upgrade
- friends who bought bigger houses than they needed at the time now have families and their homes fit them well
- the friends who took more bought better investments: proper family homes that sell well, rent out well, can generate extra cash via lodgers/students etc

GinIsIn Wed 25-Jan-17 10:55:11

We took 2/3 of what we were offered with repayments that almost equal what we would pay to rent.

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