How much mortgage is too much?

[Manc2]

I’m hoping to hear sone opinions on how much is too much to borrow for a mortgage.
DH and I are both 30 and live in Manchester. We want to buy a new house but can’t agree how much is ok to borrow.

We don’t currently have any children but may want one in 5 years ish.
Our joint income is 100k a year and our only debts are Student loans that will be cleared in the next coup of years.
Mortgage calculators seem to think we could borrow 550k which sounds huge.
So can anyone help with how much is actually reasonable to borrow? Thank you

I don't think that's right @Bobsyer, it sounds like that comment was about buying at around 300-340k using their deposit and getting a 200k mortgage.

I agree that a 550k mortgage sounds like an awful lot, but there's no rule to say that you have to borrow the maximum that you're allowed to.

You'll get such a range of answers on here OP, that I'm not sure it's helpful and I disagree that MN is generally conservative with these things, more the opposite, looking to buy large houses in the most expensive areas available.

But it really is personal preference although I wouldn't get hung up on a mortgage or monthly payment of X amount being 'a lot'. You just have to carefully look at your budget and lifestyle aspirations, ie do you want lots of money available for cars, holidays, pensions, savings etc and also consider the impact of future DC, plus other challenges like redundancy etc.

If you both like your jobs are they are secure (as can be), go for what amount you can afford. If you are thinking your jobs could be lost at anytime then maybe borrow less in case you have to take a lower paid job. Our joint income is 80k and we have a 100k mortgage (house in good area but small, worth approx 180k) . We’ve both experienced redundancy so for us that’s all we are prepared to borrow

@Manc2. It’s fine most months. However this month we had all the Christmas presents to buy and also 500 litres of oil £246, wood for the wood burner £180 and then some DIY materials £220 and it’s pretty much all gone. In a ‘normal’ month after all bills we usually have £1k left over for either fun stuff or to save but as this house needs work most of it is eaten up on DIY.

We usually have money each week for a take out and we don’t stress about cash but I wouldn’t want a bigger repayment! Thankfully our mortgage is locked for 5 years so it’s not affected by interest rises.

How much can you afford each month? Dh and I on about £100k a year and we were offered a mortgage of £630k.

That seems unusually high, who was that with?

I disagree that MN is generally conservative with these things, more the opposite, looking to buy large houses in the most expensive areas available.

I think the answers are generally conservative because I think the demographic is a little bit older & people are already on the ladder with smaller mortgages. These days the vast majority need a high mortgage & chunky deposit & even then it's probably cheaper then paying rent.

eg a 500k mortgage will not buy you a large house in the most expensive areas, you would need an awful lot more.

Just go to a broker. We're on our 3rd house and have used the same guy for all, over 8 years. He's brilliant.

@WakeUpLockie we have spoken to a broker about how much we can borrow but they can’t advise us on how much is comfortable or what is affordable with a child

OP.. Not looked at house s recently so took a quick look on line around areas that I wouldn't consider expensive (but good locations to buy) in G manchester and was suprised at how little you get these days for your money...
So fully get why you want to spend the money...
If you give an example house you are looking af people can probably help you better with bills.
But yes as saving £2k a month you should be OK but do calc for one earner (illness/redundancy) and interest rate increase

@happytoday73 prices have really gone up. We have even considered moving cities as we just don’t feel like we can get a house in the areas we like anymore

We went to view a house yesterday that would mean borrowing 400k so now we just need to think about how we feel about borrowing that much

Don't forget to also factor in any moving and maintenance/renovation costs.

When we bought our first house we had previously been in a small apartment, then suddenly needed to furnish a 4-bed house. We wanted decent furniture that would last the distance and it certainly added up.

The house has also required significant maintenance work as the previous owners really didn't look after it. If you've only ever rented before you may be surprised at how much these kinds of costs can add up, especially if it's not been newly built or recently renovated.

It’s hard because attitude to risk is quite personal. I’ve always borrowed close to the maximum and it’s worked out fantastically for me so far. I’ve got half a million pounds of equity that would not have been there if I’d borrowed conservatively when younger.

I also think % of take home on the mortgage payments is a slightly skewed way of looking at it. If you spend 50% of take home and that leaves you £1000 for everything else that’s completely different than it leaving you £3000 or whatever.

Our joint income is about 90k so not far off yours and our mortgage is £700 per month. We had a £120k deposit and house was around £360k. We could have borrowed a lot more but didn’t. A few considerations for us were:

• Condition of house - if you are looking at something near perfect then could go much higher in price as you would need to spend less once you moved in. Our house isn’t a doer upper but does need some cosmetic work eg new bathrooms, decorating everywhere which eats into our leftover cash each month. We would have gone higher for a nearly new house

• We chose a longer term to bring down the monthly payment as advised by our broker. We overpay when we can to compensate for the longer term. It means we have flexibility to lower our payment if we have children or need to use the money elsewhere

• It’s worth doing projections of the monthly payment if mortgage rates rise to see if you still feel comfortable. Go for a 5 year fix if you can

• Also good to consider your lifestyles generally and how much you usually spend on hobbies going out etc. Although we could have bought a cheaper house we were worried we might have just frittered away the extra £100 or so we were saving each month and now it feels we are investing it into something tangible

• Moving is so expensive and can be a hassle. It might be worth buying a bigger house now to save this cost down the line

It's so hard trying to work out the most sensible solution for the long term. For our first we were too cautious, we thought we were being really sensible, bought something too small, outgrew it very quickly and our income increased significantly, it's extremely expensive moving (although stamp duty holiday alleviated that for us). For our next house we stuck our neck out a bit and did go to our maximum at the time for our long term home, interest rates do worry me, but I've had a big promotion since and on track for a good career so fingers crossed it won't be a mistake, though the cost of living worries me.

The big difference between us though is we are post childcare years, we had ours very young so were past the childcare years by the time we could upsize to the long term home. We will be child free by mid 40s including uni, so (all being well) should be able to overpay in the second half of our careers to be done before retirement.

I would make sure you understand all childcare costs and options in your area, worst case scenarios, coupled with interest rate rises and reflection on whether either of you would be looking to reduce hours. Equally, don't buy too small, if you decide it's the first step house try to picture if it could work long term if you got stuck for whatever reason.

I think it depends on your lifestyle and what you currently spend money on, we have a joint income of 80k and our mortgage is 155k, which is 600 a month. That feels okay for us, but we also pay for other things like car finance, a loan and credit cards for renovations as the house was a doer upper and all our savings went on purchasing it. If we didn’t have to pay for those we could afford around £1000 a month with money left over, but just take into account when you buy an older house that renovations and maintenance can be very costly and can really eat into your budget.

If you want kids make sure you can afford the mortgage on a single salary

This is my advice too. I never planned to give up work when my children came along - having a disabled child soon changed that and we were down to one salary, luckily me and DH are pretty risk averse with money so we can manage on one salary.

And honestly being able to live off one salary makes life a million times less stressful - even if you do have 2 salaries coming in, you can always invest surplus if you want to. I know couples who have household incomes 2-3 times ours and yet they don’t have more disposable income than us because of their financial obligations.

And bear in mind that although you can get salary increases/pay rises etc the cost of living also increases. And children are expensive!

I would love to have a mortgage of 600 a month but that would mean living in areas that I would feel unsafe in or that are miles from work

That’s fair enough OP, there are some beautiful places in West Yorkshire that are commutable to Manchester and much cheaper than city properties, but that does come with travel and times costs too , and the be fair commuting can be a real drawback, especially once children are in the mix.

@WaningMoon we definitely value a shorter commute over a beautiful area. Plus we need doggy daycare that is hard to find outside cities.
From talking to friends borrowing 4 times salary seems quite normal. I think the doubt is not knowing how much children cost

Well, I think it’s just as helpful to you to know what you don’t want as well as what you do want (if that makes sense!) so it sounds like you are definitely getting your list of house priorities together.

In answer to how much children cost - the cheapest childcare option (generally speaking) is childminder, then nursery slightly more and then nanny tends to be most expensive, so have a look at different costs in your area of the different options , that will help in your planning.

We bought 3 years ago before kids & our mortgage is about 1700 pm which is about 16% of our income.

We took it out on a 20 year term & had to put down a much higher deposit due to visa restrictions, but that still works out slightly cheaper per month than our old rent in the SW.

I think technically we could have borrowed upto 650k, but it seemed ridiculous, so borrowed about half that instead.

Factoring in nursery fees etc, we’re still very comfortably off - we made sure we could afford everything just on one salary & as it happens, I got a massive pay rise after mat leave which covered our nursery expenses and more.

I’m glad we didn’t take the higher amount. We will sell in 8 years and relocate & I didn’t want to be stuck with a 750k+ house which is more difficult to sell than a 450-500k house.

Nursery fees for one DC four days pw are just shy of 1k. We’re on 130k combined income & save about 20-25k of that per year.

I always focused on how much to pay each month and other things I might want to do. You are young so you would want holidays and disposable income. I would try to find a reasonable home for now to get you on the ladder.

This point has already been made but bear in mind interest rates are really low. Will you be able to afford the repayments if they go up to 5%, 10% etc. I remember them being 15% albeit 30 years ago.
Inflation is going up, while no means certain interest rates are predicted to rise.