Is £950 per month on mortgage reasonable in this situation?

[bluebellls]

Combined income of approx 3800 a month after tax.

We are in our 20s and first time buyers. Looking at a brand new development. Taking out a 195,000 mortgage at today’s rates would mean repayments or anywhere between 870 and 970 monthly depending on the term. Due to our age we’ve had advice from family that we might as well take out the longest maximum term possible. Of course will seek financial advice too.

Overall the repayments would be 23-25% of total income. That is with both of us working full time and with DC in the future picture- I know childcare costs are horrendous but we would hopefully only be needing two days a week when the time comes.

Am I being silly for thinking this could work? We could find a cheaper property and pay £750 a month but that would mean compromising a little on area and running the risk that the older house hasn’t been maintained, whereas you’ve the 10 year warranty with the new one.

I think it sounds absolutely fine.

Seems perfectly reasonable to me. Save as much as you can for future rainy days.

Yes sounds manageable

The amount is reasonable
I would not advise buying a new build flat though, but would consider a house as long as you aren't focused on the value increasing and it is big enough for you to live in with children

Sounds perfectly normal and manageable to me.

Yes that sounds manageable. We took out the maximum term when we first bought, in our 40s now and we've cleared the mortgage by over paying so it doesn't mean you'll have to keep that term forever. We also bought a new build which gave us peace of mind. Congratulations!!

i think the advice is no more than 28-30% ish of gross income...but brand new developments aren't always the best value, people pay a premium for a brand new spanking house when older properties(perhaps 1st sale after new) that are still on a newer development can be better value...particularly as we are in a housing slump at the mo.

It sounds like you would be better off then most ...until the childcare costs....

That sounds fine to me.

If you’re in your 20s and are happy to wait a couple of years for children, then there is an argument for going for the shortest term/highest monthly payment that you can afford.

Its highly likely that your salaries will increase over time as you progress in your careers, meaning that now will be the hardest time to pay the mortgage. Pre-kids you also have a lot more flexibility with your budget.

As a general rule, the shorter your mortgage the more capital and less interest you pay which makes trading up easier too.

It’s also worth choosing a mortgage deal which lets you overpay in the future for the same reasons

I agree with @2022again
The NPPF housebuilding bonanza has led to some shockingly poor quality housing. I would have to check out the builder before going for a new build.
Do not forget some life insurance, income protection and/or critical illness cover.

It’s fine. I’m a single parent and my mortgage is about 30% of my take home (which is less than yours) and I survive.

I wouldn’t get a new build though.

It sounds reasonable, but can you still afford it if rates go up another couple of percentage points? That’s where people have been caught out in the past

Oh and 100% budget for life insurance. And make sure it covers everything. I speak from bitter experience.

We’re in a similar position. Similar monthly mortgage payment and income. The advice I was given is to get the biggest mortgage you can as your income is likely to increase. Also if childcare is likely to be a consideration they’ll re do your affordability which may mean not being able to get a different mortgage provider until children are at school. Childcare costs are the killer, ours have gone up 26.5% in a year and are now about £820 per month for 3 days (our nursery is fairly cheap).

While I think you should be cautious we made the decision to buy our current house vs another one as we felt the other one was just beyond our budget. The mortgage difference would have been around £75 per month but the overall amount just felt like too much to borrow.
The other house is now worth £200k more than ours for a variety of reasons and while we do love where we live and I don’t regret buying this house it would have made better financial sense to buy the other one

Personally I don't feel that a new build is a sound investment, and particularly not in the current climate. If you are absolutely certain you're going to be staying there long term then that's fine, but I definitely wouldn't buy it thinking "we'll just sell up and move in a few years if we have kids and the sums don't work".

Thanks all! It’s a 3 bed house we are looking at so would be able to stay for a very long time. I think the figure just sounds daunting but know realistically this is what people do pay.

That's not a mortgage burden relative to income that would put me off. And your income isn't static, being so young, there will likely be opportunities to increase it over the term of your mortgage.

I wouldn't be especially keen on a new build, as I believe prices are reducing (perhaps you could negotiate with the builders?).

But if you are planning to stay about 10 years, then go for it.

Much better to buy a house than a flat.

Yes, the guideline is that rent/mortgage should be about 25% of your income so you're pretty much bang on.

That amount is fine, although I question the advice your family gave you to take it out over maximum term? You’ll pay considerably more interest, whilst you don’t have children I’d probably choose a shorter term and pay more than £950.

It sounds reasonable to me, rent for 3 beds round here is more than that. Save and overpay as much as you can before you have kids as well.

Older buildings were often built with better more longlasting materials (and larger room sizes, and larger plots (more parking, more garden, more privacy) than some of the crap I see being thrown up round here. I wouldn't touch most current mass development new-builds with a bargepole. I've seen what they were built with :-( Who on earth buys a "detached" house so close to the neighbours you can hear them fart (indoors and out).

My 30 + yr old property (a development project, 60 homes) is beautifully designed and constructed in top quality materials and fittings. (bricks, woodwork, roof, plumbing, insulation) . It's so warm we could easily live without CH (in winter in the Highlands) . The original owner who bought it off-plan, specified the best, top grade of optional fittings. It's in superb condition.

An experienced viewer can easily tell whether an older property has been solidly built AND well maintained for decades (or a cheap and shoddy heap, renovated at rock bottom grade, to sell).

Your surveyor (or the free Home Report in Scotland) will list comments on the state its in. So if an older building does have age related or maintenance faults, you'll know before you buy. Don't be put off by superficial problems that can be changed later, like decor and an overgrown garden.

If this is going to be a longterm family home, then plan ahead for your future. You'll need a garden; and consider ease of access to schools, parks, and a mix of local housing within reach. Childminders rarely inhabit expensive little villages. One day it might be useful to have a dedicated room for
WFH; or a live-in au pair or widowed parent.

Your mortgage to income ration is good, so get the biggest longest mortgage you can and invest it wisely.

Sounds absolutely fine. When I was in my 20s (20 years ago!) I was paying about £950 per month in rent! I didn't have the income you had. I scraped by. If I'd been in a position to buy back then, I would have so much more equity in my home now.

I would take the longest term available and overpay each month.