Had an offer accepted on a house, and now I think the mortgage repayments are going to be too high. I’m terrified.

[Hfjshdhs]

We have sold our house, and had an offer accepted on another house. I didn’t think the offer would be accepted, but since it has I’m absolutely terrified that we won’t be able to afford the mortgage repayments and I’m thinking about pulling out.

The mortgage repayments are 29% of our take home pay.

We have two children and won’t have any more. They are both currently in very expensive childcare, but the oldest will go to school next year.

Until childcare costs go down things will be tight. Not too tight that we can’t pay bills, and we have savings for unexpected costs. But it feels uncomfortable after having lots of income spare. The kids can still do activities.

We would get a 5 year fixed mortgage so we know what our costs are, and in five years we should have had pay rises/promotions, and both children will be out of full time childcare. We should in theory be back to where we are now financially.

The house we made an offer on needs a lot of work. It’s liveable, but not ideal. It’s also in an absolutely ideal location, and could be absolutely amazing once we can afford to do renovations. But that won’t be for another 5 years at least.

Basically, I feel sick at the thought of moving there, not excited. My DH is also 50/50 about it.

If we don’t buy this house, it’s back to looking, and barely anything is coming up.

Any advice?

I don't think 29% is too much is it?! Thought it was pretty normal.

Is it just buyers remorse/cold feet? If you can manage it now and over the next few years childcare costs will go down and promotions are likely it shouldn’t be an issue.?

If you had to go back to looking you’d need to be looking at cheaper houses…….would you find anything? I’m assuming it wouldn’t be as good, would you be happy to lower your expectations house wise?

I must admit I live in a house which was always easily affordable. Our mortgage has never been more than £250 a month which is less than 5% of our income. We could have bought a much bigger/nicer house, still could. But we stay here. A 3 bed semi is big enough for 3 of us. The house is nice. It’s great having a good amount of disposable income. Ime kids get more expensive as they get older. You lose the childcare but other kid related costs go up.

Is it much more than you are currently paying in rent/mortgage?

@Schleisch

I don't think 29% is too much is it?! Thought it was pretty normal.

I should think that plus high childcare is the problem.

I suppose it’s:

• can you live with very tight finances for 12 months? Then it will get better quickly as childcare goes down
• do you have any backup for unexpected costs (savings, parents who’d help)
• how desperate are you to move? What if you had to wait 2 or 5 or 10 years to move?
• can you be happy in the un renovated house for 5 years.

29% sounds completely reasonable to me, I've just done the sums and ours is 30% of our take home pay and that doesn't feel a huge amount to us. 50% I could understand but surely 29% is normal? But if it makes you uncomfortable and you are not all that keen on the house anyway then probably a good idea to pull out of the transaction. Can you stay where you are until you don't need to pay for childcare?

Mortgage providers aren't known for being frivolous in who they lend money to on the other hand, so you have clearly passed the affordability checks 🤷🏻‍♀️

Everyone has to feel uncomfortable sometimes. It’s really up to you how much discomfort you can handle.

It sounds as though you will be fine but no one on this thread can predict the future.

Ok thanks, I think I needed the sense check of whether others think I’m over extending.

We’ve always been lucky enough to live in a house with a mortgage around 14% of our take home.

We could wait a year/2/5, but house prices where we are are rising at crazy rates and if we don’t move soon it could become completely unaffordable.

A pp says children get more expensive as they get older. While that’s definitely true childcare can be the exception to this. I used to pay £1,600 a month on nursery 10 years ago. My children definitely don’t cost anywhere near that currently! Maybe if I’m generous when they go to uni.

29% sounds ok and once your kids are in school those childcare bills will drop hugely. You also have savings. Personally I’d go for it

If it's in a good location then it could be the best financial decision you've ever made. Hang on in there.
In the meantime, can you find a way to increase your income. Side hustle? Ask for a payrise?

This will almost certainly be our situation with the next move. If it’s going to be your forever home then I’d play the long game and put up with the short term stretched finances and less than ideal work to be done situation. Just think how 5 years from now you’ll be remortgaging it with stacks more equity after having done the renovations, kids will be out of full time childcare and you’ll hopefully have more earning power - and then that house will be yours forever

Ours is about 33% when you take into consideration all the life/contents/buildings insurance on top. It feels fine to us.

I’m sure I read that 30% is the “affordability threshold” for housing costs so you’re at the top end but lots of people (especially private renters) are in a similar position.

Depends if you feel comfortable or not though! Childcare costs can be brutal - but after 3 they go down quite a lot if you’re both working, then even more once school starts so sounds like you won’t be at that level of outgoings for too long?

Housing should be a third or less of your outgoings optimally

Could you take a slightly longer term mortgage just to reduce the monthly payments a bit? A mortgage doesn’t have to be the standard 25 years- it can pretty be much any length you like, as long as you have a plan in place of how you’ll pay it back if it will take you past standard retirement age. Most mortgage companies will let you overpay by about 10% of the outstanding balance each year penalty free whilst you’re in the fixed period, and you can often overpay as much as you like once you’re out of the fixed period. We always take a longer term mortgage and then overpay each month as we’re both freelance and it gives us a bit of wiggle room.

@Flusie thanks, but it’s already at the maximum we can take

Whether 29% is comfortable depends a lot on 29% of what.

29% of £2k pm leaves £1420 for everything else so will feel tight.

29% of £10k pm leaves £7100 for everything else, so should be more than enough.

Things will feel a lot more comfortable when childcare costs start to drop and you say the house is liveable. So you'll be able to do the work over a relaxed pace rather than rushing through everything right now.

Assuming by 'liveable' you just mean the fittings and decor aren't to your taste, rather than there's no heating and the plaster is falling off the walls.

Having to pace yourself with renovations and not starting anything expensive for a few months will also allow you to get a feel for how the house works for you and where you want to go with it.

What would rent be, as a percentage of take home? Presumably similar but for less space and niceness? At least some of this payment will be repayment of principal and therefore equity to you, and there's also security of tenure to factor in as well as (hopefully) capital appreciation over time.

Every house we’ve bought has engendered some wobbles and wonderings, but you seem to have worked out your finances and costs. You’ll have a better house long term.

I’ve always been overly cautious with things like this and in all honestly I’ve always regretted it. The thought of a year of being tight put me off so much I bought a smaller house. A year later with annual pay increases and kids at school I fully regretted not going for it. The tight year would be a distant memory by now and I could’ve been in my forever home. Instead I’m making do whilst saving for something bigger.

We were in exactly the same situation. It was tough, given the childcare costs- we ate a lot of cheese and eggs!- and used savings to help us through. For several years we were effectively 'paying' £200 pm for OH to work.
However, it was absolutely worth it to have a great house (nothing fancy, good sized terrace) and each time the childcare costs dropped we felt so rich

Given the current market, I'd go short term pain for long term gain. We did a 5 year fix too.

I think if you can do it, and wouldn’t be getting yourself in any trouble, I absolutely would and just take the pinch for 5 years. We did similar and I don’t regret it for one minute. We don’t go on extravagant holidays but I absolutely love our house, area and having more space for our children. We’re also paying out huge childcare costs but in 5 years will have some spare.

I think it sounds fine, I can see why you are being cautious but honestly you are in a good position and this position will only improve in time.

What is a 2 year mortgage interest rate? I did 5 years then Covid hit and they dropped and now I'm losing out by enough to be annoyed about.

Go with your gut. You should feel excited about the move. It could be a big mistake to make.