Is Our Mortgage Sustainable? Advice Needed

[Gabaru]

We are first-time buyers, and our mortgage for £575,000 has been approved. We are putting down a £11,000 deposit. My take-home income is £4,200 per month, and the mortgage repayment will be £2,430 per month.
Given the current cost of living, I wanted to ask if this setup seems sustainable.Any advice or insights from those in a similar situation would be greatly appreciated.

I’m assuming she hasn’t worked in at least 14 years? She’s probably not going to be high on employers list.

No idea what sort of jobs she’s applying for but I’ve seen friends in this position. Kid gets to mid teens, they decide to work after over a decade and can’t even get a MW job, not in retail, not admin work…..I mean it might have been them personally, maybe their applications were crap i don’t know.

Oof. I wouldn't.

We have a similar mortgage repayment but it's 33% of our joint income. And we'd been paying almost the same in rent for years so we knew we could manage.

Even so, we are not saving much, and we have to keep a tight rein on eating out/ clothes/ holidays etc. Even our supermarket bill is around £600 a month (3 young kids).

Agree with pp that your wife needs to get a job, and you need insurance in case you lose yours. Also what happens if you can't afford the mortgage repayments in 5 years? If you sell and have to buy again, will that not wipe out any capital gain from owning it?

How is it 5x salary if your take home is only 4200? Are you putting 30k per year into a pension?

4200 suggests a salary of 70k, which is a multiple of 8x salary, which would never be approved.

Either the mortgage advisor is your brother or you have got your maths wrong.

Edited to correct my own dodgy maths!

I think that would be very very hard going. My family of 3 (one in paid childcare) spend about £3k per month (over and above the mortgage) on all extras including bills, transport, home maintenance, food, one cheap holiday per year

How does it work with those numbers?
I can't get to your numbers in any other scenario than interest only mortgage.

Have you said £575000 mortgage when you mean £575000 house cost minus the deposit?

I looked at the numbers you originally wrote in your post seeing how I could reach the stated mortgage cost:

Option 1:
£575000 mortgage for 30 years would need to be 3% interest rate to give a payment of £2430.
It's not possible to get an interest rate of 3% at the moment.

Option 2:
£575000 for 48 years at 4.5% gives that payment. A 48 year term is impossible.

Option 3:
Or are you intending to do this interest only (terrifying option)? In which case 25 years at somewhere between 4 and 5% gives you a £2430 payment, then you need to find the money to pay off the house in full at the end.

Based on these options I calculated the total interest plus capital payments:

1. Not possible at this point in time
2. Option 2: total payment of around £1,404,000
3. Option 3: total payment £1,304,000

The percentage of your take-home salary you would be spending on mortgage is insanely high. What happens if the economy crashes or war breaks out and house prices crash? Is your job secure, would you be in negative equity?

Looking at the total monies repaid, most of the money you will earn in your entire working life would go on that mortgage leaving you nothing to pay for repairs/cover periods of family illness or unemployment and, depending on your current arrangements, leave you with insufficient pension. It would be a complete millstone.

I appreciate this is not possible in places like London and that people feel they have no options in certain parts of the country. It may seem this way but what I write next isn't said to rub it in your face - I worry when I see people thinking of taking on ridiculous levels of debt to the point they may put their future in jeopardy and want to illustrate what taking on high levels of debt over long periods does to harm people's wealth.

For comparison -I am 37, husband 39 and we have 2 kids, one at nursery, other getting wraparound care. Household take home is £8250 and our mortgage costs us £786 per month (would have been £1200 had we not overpaid).

We bought our house in 2016 for £390000 borrowing £260000. The bank would have lent us at least a £500000 mortgage. We didn't stretch ourselves. We overpaid our mortgage knowing interest rates would return to historic norms and bought well below what we could 'afford'.

We will pay our mortgage off in 2 months and will have paid about £23000 in interest in total. We plan to live in our current home for another 3-4 years mortgage free, then will be able to buy a house about the same cost as yours mortgage free when our kids will be 11 and 8.

Your house could cost you £1,400,000 in total when you include interest.
The same house will cost us around £720,000 including interest.

I'm writing this down in case this gives you food for thought.

I've always had a rule of my mortgage not being more than about 25% of my net income but I am very cautious with money. The stress of being so stretched financially, wouldn't be worth it. Bills, council tax, travel, food, and everyday emergencies on top of that.....

I’m not sure how the bank approved the loan but it’s also on you to take on a responsible amount of debt instead of expecting the bank to decide the sensible amount for you.

What worries me the most is you don’t seem to have a clear picture of your finances and expenses and that should be your starting point. You can use a spreadsheet to document all your income and expenses to see where your money is going, what you can cut down on and if the mortgage makes sense. There are also many apps you can use as well if you prefer apps to spreadsheets.

Saving only £100 on a £4k + salary is not ideal at all, any emergency can very quickly get you in trouble.

what other debt do you have aside the mortgage you are taking on?

And why is your wife not working when your child is 13? This is the issue with women staying home, they pay for it with their careers and earning ability. They have fewer opportunities available to them the longer they stay away from their careers. I can understand taking a couple of early years but 13 years is a long time to be out of the job market.

Anyway in summary it’s very tight and frankly I don’t even think it will work given you only save £100 a month when you rent for £1500 unless you are making cuts in your expenses to make up the difference. It’s your call if you go ahead with it or not but know the risk you are taking.

PS: there are many personal finance channels on YouTube that you can watch to learn how to manage your finances, a lot are American but the principles still apply in the UK and there are some UK channels as well. You need to work on the foundation of building strong finances and it starts with knowing where your money goes.

The wife does not work. She is not in any sort of paid employment and possibly hasn't been for 13 years or more. I dare say many people would love to be painting or meeting their friends for lunch or baking but, in the 21st century, in London, unless you have a huge inheritance or something similar, most families need two salaries to buy a house. That is what we are talking about here. They cannot afford this house because they have only one worker.

So you'd have £1770 a month to pay for all your family's expenses. Its possible, how much are you willing to compromise on your standard of living? Look at your current bills and do a spreadsheet.

What would you do if at the end of your fix, the interest rate has increased or the market has fallen and your house is worth less?

Your kid is 13 now, but in 5 years will be 18. How much student loan will they get? Will you be required to contribute to funding uni?

Going from renting to owning will have a few extra bills You'll need to pay for home insurance cover on the building, not just the contents. You should also get life insurance which will cover the value of your mortgage in the event of your death to protect the surviving partner and child. You'll have to cover decorating and maintenance costs on the building and pay for any appliances to be fixed or replaced when they break

Assuming you have no intention of divorcing in the future, if your wife isn't working she also needs you to be paying into a private pension, for her own financial security in the event that you die before her, and it also makes sense tax wise that your retirement income is split between you. There's no way you could afford this too

There's no way I'd go ahead with such a high mortgage in your family's current circumstances.

The person in question is probably an expat. EMI is very commonly used term in Asia.

Here are the details
salary net monthly £4250 ( Anual salary £77,271) includes health insurance and pension deduction
Annual bonus considered for mortgage £5000 (2024,2025)

Mortgage approved - 465000 (5.5x of salary)
I am paying the difference as a deposit

@borborygmus1 has it. I can't deduce these numbers at all. I also cannot fathom 100 per month savings on a 4k per month salary. For context, single, short of 4k per month take home, no children, 130k mortgage and would still have to tighten the belt if rates were to rise significantly. That's with 40k savings easily accessible too.

Here are the Details:

• Net Monthly Salary: £4,250 (Annual Salary: £77,271) – includes health insurance and pension deductions
• Annual Bonus Considered for Mortgage: £5,000 (2024, 2025)
• Mortgage Approved: £465,000 (5.5x of salary)
• House Price: £575,000
• Deposit: Paying the difference as a deposit

I appreciate your insights. The housing market has changed drastically. It's no longer possible to buy a decent home at 3 to 4 times your salary if you want to keep your mortgage payments below 30% of your income. The same house, which was around £450,000 to £475,000 pre-COVID, is now priced at £575,000. House prices have increased so much that affordability seems completely disconnected from income levels. Our primary reason for choosing this property is its proximity to our son’s grammar school — we want to reduce his commute time, so moving further away to a cheaper area isn't practical. We've been searching for a house for the past two years, and this one, despite requiring complete modernization, was sensibly priced compared to others on the market. If you’ve had a chance to look at house prices today compared to 2016, the difference is shocking.

@Grammarnut some of us modern day hard working women can, and prefer to, pay someone to keep the fabric in order as you so put it, nothing like coming home to freshly laundered sheets and a V shaped cushion 😂 i have yet to ask them to bake or preserve though!

I'm surprised that in Hackney they're not actually giving them away!

Who would voluntarily move there with a 13-year-old son?

But you now say the house needs complete modernisation. How are you going to afford it on top of this mortgage?

I understand housing costs are exorbitant, but you really may be better off looking slightly further out and relooking at suitable schools. Coupled with your wife earning.

She holds a bachelor's degree in engineering but has never worked before. Unfortunately, she's finding it extremely difficult to secure a job in the current market — not even getting interview calls. I suspect the job market is quite challenging right now.
We never seriously felt the need for both of us to work before. Pre-COVID, things were manageable, and we were planning to buy a house that was affordable, with lower interest rates. However, due to our son's grammar school, we had to postpone those plans.
Now the housing market is beyond reach, and finding a decent house within budget seems impossible. The situation has changed drastically, making it much harder

I’m sure your wife could get a job in McDonald’s or similar , she’s going to struggle to get much else if she’s never actually worked and she will have to start somewhere otherwise this proposal is going to leave you in massive debt .

Any plans for more children? If just 3 of you look at something smaller or even a flat? Much better to have some disposable income and savings!

The thing is if she’s never worked before and a fair amount of time has elapsed since her degree, she needs to be realistic in what type of jobs she’s applying for.

Not getting interviews is quite telling. What is she actually applying for?

Looking for IT job like software testing

She needs to lower her job standards significantly - she has to work in order for this to work and needs to get whatever she can wherever she can to get experiebce

Looking for IT job like software testing

I think she's out of sync with how testing in IT is conducted now. It used to be an entry level job, but all the focus now is on testing automation as part of a DevOps operating model where systems management and development are a combined function.

Testing is built into the development lifecycle by experienced DevOps practitioners - most who whom have good (great) coding and systems engineering knowledge.

Having never worked she needs to be realistic that her degree holds little value - so I'm not surprised she's not getting anywhere.

The mortgage you are proposing is unsustainable, full stop and you are not even factoring in how much more your son will "cost" as he grows older.

The outlay for older teens is significantly higher than a 13 year old. Food, clothing and general expenses - and if you have aspirations of him attending Uni and want to help him then forget it with that mortgage.

If you want to buy your wife needs a job first before you risk what financial security you have. To do that she needs to retrain (which will take time, but may be worth it medium term) or lower her expectations of what type of work she is qualified for.

You’re right the job market is challenging right now. Companies will prioritise new graduates who are up to date over someone who has been out of work for 13 years. Harsh but true. She may really struggle to ever get a job in engineering now.

Your wife retraining is a good shout. Would she consider nursing or similar? Three years training with student finance and an nhs bursary of 6k. Then a decent enough wage and good employment prospects at the end of that.