I'd really appreciate any of your thoughts on this, we're looking at a property at the moment for £425k in a desirable area, with a 175k deposit. Under a current 5 year lock in, this works out at about £1090pm on 250k borrowed over 25 years. This is about 26% our total income per month, after bills etc that leaves about 1.3k - and that's basically all eggs in one basket.
I think on paper it sounds fairly good, what I can't decide is around the risk of what might be in 5 years time and if 250k is just too much to borrow? If we assume maybe worst case rates go to 8%, and house prices have fallen then after 5 years that could jump to £1700/pm at 45%+ of our income. (Income wont go up much). Could I just have the attitude that worst case we down size in 5 years and write of some of the deposit if prices fall?
Where should you draw the line!? This is a nice property and a stretch for us, however we could just minimize the risk, live in a rubbish estate and go for a 300k place and have much more free cash?
Budgeting for unknowns like, cars, renovation etc also adds complexity
I think it is very affordable at the moment. Not so much if one of you wants to reduce your hours, gets sick, made redundant etc. But you will both probably get pay rises in the next 5 years which will offer some protection from interest rate rises.