Taking out this mortgage… would you?

[Tyuir]

1,000 a month at maximum term of 40 years. 40% equity. 4 bed 2 bath place.

Rent nearby is around 1,400 for the same sort of place and around 750-800 for a smaller place maybe half the size. I have one dc.

I want to move to be closer to family with DC but also because I wanted to move up the property ladder while interest rates are low enough to do it. I’ve got 2.74 at the moment and the same product has already since gone up to 3%.

im 34 if that’s relevant.

Is this fixed rate? What are you going to do when fix ends??
mare you going to have £1000+ a month at 74? Is this going to force you to work longer?
i absolutely wouldn’t.

@Cantchooseaname i have inheritance to pay it off later on but realistically would move anyway before then

rate is 5 years and I don’t know what I’d do if the rate went up after that, I may have to downsize.

A 40 year mortgage sounds like a bad idea to me.

Do you need a 4 bedroom place for you and one DC? I’d be tempted to get somewhere slightly smaller as it would feel like too much of a stretch for me

How can you guarantee inheritance
all it takes is a remarriage and a new partner or a nursing home and you won’t have anything

do you have the money from the inheritance ? Or is this some future death? I would be extremely careful if the latter- you have no idea what their care needs maybe, and even a sizeable pot of money can be decimated quickly.

Is it less than 50% of your take home pay and how secure is your job?

That's a big house for two. If you hit financial difficulties can you rent out two rooms? I would check my contingencies incase things become difficult in unforeseen ways

It depends on your income and if you can afford it £1000 doesn't sound that crazy to me for the size of house and 40 years is becoming a standard mortgage term for many.

@70kid @Cantchooseaname given the outstanding mortgage it would be highly unlikely not to be covered (family own 5 other homes). But I am prepared to have to sell if it comes to it.

@SamanthaVimes in the area there’s one at 440 but it’s not a cheap place so it’s difficult to find anything much cheaper unless we went further out but sort of defeats the object of the move

@DrFlorence theres an annex we could rent out but maybe only 60 a night. It’s around 35% of take home pay but also get 750 CM. At the moment, I’m aware that could change.

I wouldn’t but we purchased a four bed place a few years ago thinking we’d have multiple children. We now know DD is going to be an only child and are downsizing as we’re paying for and heating space we don’t need.

No. You don’t need 4 bedrooms so why pay for 4 bedrooms?

40 years is a ridiculously long mortgage. I’m surprised that would even be an option for 34 year old given it takes you beyond retirement age.

And you also can’t rely on an inheritance that may never happen.

40 year mortgage sounds like a terrible idea. Especially for a 4 bed house when there's only 2 of you. Dont forget that bills and maintenance etc will be higher in a bigger house.

Why would you buy a four bedroom house if you only have one child?

I’m surprised they’re letting you got to 74 but my mindset has changed around long mortgages. We’ve just extended our term to give us more flex (but intend to overpay). I’ve always wanted to pay off as quickly as possible but in theory, inflation should start to erode the debt (assuming a low interest rate) and it is more tax efficient to pay into a pension and make payments from that. But it is a gamble and is obviously a more scary prospect if interest rates were to go mad.

@Tyuir
That's not too bad then. Only 35% of your wages. And if you long term rent out the annexe you could make maybe £500-600 a month? If you needed to.

I can see why you would, as your house will keep going up in value and you can downsize later on with a hefty deposit for your Dc for their home. If they can move to the annexe as an Adult and pay some rent.. whilst you all carry on saving.

it'll bite having a mortgage that large but if you you're not generally a big spender on other items and are careful with holidays, cars etc - some PP don't realise how much money they may waste on going out and designer clothes etc that could be spent on future or maintaining a lovely home. Always keep a boiler fund (£5K) at least, as big houses can eat up your money for repairs and maintenance.

Your mortgage will go down as you pay it off so in 10 years time, especially if you overpay regularly (even by £100 a month) it'll be doable.

Bear in mind hills are really high though on a larger property so check out council tax and utility bill costs. And see what you can do to insulate your house. Maybe consider fixing the gas and electric at least for a year. It may have stabilised in a year.

I can see others words of caution, but larger houses go up disproportionately faster in value than smaller, generally. So you'll be left with equity for your retirement and for deposit for your child at some point.