AIBU to take out this mortgage?

Yes that stood out to me as well, and someone even said the OP had a good deposit? How?

We paid $350k deposit on a $1.8mil property, and that was the minimum required. I guess depends if they're getting a lenders mortgage insurance, we wanted to avoid that and it meant we needed a higher deposit.

If your deposit is small then lenders mortgage insurance is required which is a lot of 💰

Agree with this. I would absolutely go for 2 years fixed.

People who go for 10 year fixed just sound silly to me, I'm sorry. I can't even bear to think of how much money I would have lost if I had fixed rate on my homes.

Congratulations btw!

How did you manage to find a mortgage that allows less than 10percent deposit? We really struggled to find one and had to have at least 10 percent down-payment for them to accept us you have done well.

Take the 5 years and put the £200/month saving into a separate account. When you come to remortgage in 5 years use the saved sum to pay off some capital then hopefully you can get a shorter term. Enjoy your new home!

Sounds doable to me.

Look at moneysavingexpert.co.uk budget planner. Its lists everything! I hadn’t realised until we first did it how much we spent on haircuts as a family.

Also, go through it with dp so you are both in board with how much you spend, income, outgoings etc.

Also make sure you have considered if either of your can't work due to ill health and have sufficient savings/insurance/employer sick pay to cover this.

I agree about the 5 year fix, especially if its £200 pm less. Interest rates would have to come down a lot for you to be worse off because you have the extra £200 a 2 year fix costs to overcome first and if there's fees on the mortgage, obviously they need considering.

Mortgage brokers like 2 year fixes because it gets them more than twice as much in commission. Don't fall for it.

I also agree with others about a 40 year term being insanely long (look at the amount of interest extra it will cost you compared with 25 years) but if you overpay as much as you can, or save into an account if there's a limit before penalties apply, it gives you a bit of slack in your budget of costs that you have to pay.

Go.for it.

Personally I would go for two based on current inflation. I work in risk in property and would be comfortable with this gamble at the moment. Any savings in terms of interest rates I would put away to make a capital reduction, overpayment annually.

Interest rates were artificially low for a long time. My first mortgage rate was 4% which was good for the time.

Interest rates might come down a little. For the sake of £200 a month in your position (with you both contributing) I would go for it. I wonder if you could negotiate the price a little more? It's always worth a try!

I know you have a good deposit but if you could possibly find more you'd have more mortgage rate choices.

Generally property is a long game and whilst you will feel this increase initially (the first year of my mortgage was terrifying) it is much better than renting.

40 year term doesn't matter IMO if it's allowing you to afford the payments. You'll probably move on up or down the ladder well before that's up. I also think a 2 year fix is best because prices are expected to fall. You can always check what the ERC would be if you did a 5 and then moved to another deal.
All opinions of course! Others will have theirs but that's my 2 cents. Good luck!

Are you borrowing on a C&I basis or interest only

Its fine, you are currently saving and paying rent of £400, total £1,200. Your mortgage will be £800 leaving at minimum £400 to save, Definitely gamble on interest rates coming down as inflation appears to be looking more controlled

I never played the interest game too much. I fixed depending on my financial and family outlook at the time. For example, I always factored in a 10% a year overpayment and tried to reach this as a savings goal. Once I had fixed I never looked at interest rates again until it was time to. Sometimes I fixed for 2 years sometimes 5.

If I were in your shoes I would fix for 5 years, adapt to the increased outlay and save as much as I could a year for an overpayment.

I would want the security of 5 years at this stage in the game.

40 year mortgages are the norm in many places. The main tool for me is having flexibility to overpay (bring this term down) and security of knowing my minimum payments over a fixed time. I plan financially from this point not a perceived possible saving on fluctuating interest rates.

However, I had children at the time and as you don’t a 2 year fix maybe a better fit for you.

I would do it. The house is still more affordable to you today than it will be at any point in future - rates are expected to go down, asking prices will only ever go up. With secure jobs I would absolutely get the best house you can afford and make it work.

It sounds like a good choice of house and a big jump, but manageable. You could always have a lodger for a while if it was too tight.

Suggest you check if your mortgage permits (1) overpayments if you can afford it and (2) a lodger, which could be a good way to increase your income if you need to

Go for the 5 year fix. The interest rates aren't insanely high- they have been artificially low for years. Use the £200 extra to overpay.

It seems completely fine to me as a proportion of your joint income.

The 40 year term is a bit of a concern though - that’s a ridiculously long term and the interest you’ll pay over such a long period will be insane. I would recommend overpaying with whatever spare cash you can find, and when you come to remortgage - assuming rates have hopefully come down - look to keep your payments the same and reduce that term.

Sounds affordable for you, do it. I would probably go for 5 year fixed though and put the £200 saved per month into overpaying. Interest rates have been exceptionally low the last few years compared to historical rates, they’re unlikely to drop much in 2 years. Also overpay as much as you comfortably can alongside your savings.

So, you currently (as a pair) pay 800 rent, and save 800 (maybe more if your partner also saves). You admit there is plenty of scope to cut back on socializing, and are concerned that current rent+current savings isn't sustainable for a mortgage amount?
Sounds tight, but doable.

Do it. Better to plough money into an asset of your own than into the pockets of a landlord, if you can.

Although make sure you have a back up fund! We thought our house only had cosmetic work to do, survey raised a slight damp bit but we thought we can manage that. How wrong we were! 75k later.... 🥴