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.

Ok so you are plainly going to be well short at least until your wife gets a job

As a rule of thumb, I'd never buy somewhere with a mortgage that's higher than local rents. If you can rent the same place for £1500 no way would I buy for £2400 a month.

It removes an option for it all going tits up. Our house was £750ish a month mortgage, local rents £1100, single rooms letting for £400-£500. If we lost jobs etc we could have let it out or got a lodger and we'd have been able to cover the mortgage. Interest rates went up obviously so now it's just over £1000, but rents are now locally £1300 ish so still an option.

I don’t think so. A Quick Look on RM has pages of properties between 550 and 650K. Don't which area OP is in, but these were Hackney, outskirts of Islington etc. A deposit of 110 and a mortgage of 400 may be possible. These were mostly 2 and a few 3 bed places.

Not ideal, but better than the mortgage originally mentioned and also depends on how far out and commuting costs.

Exactly. The salary figures and the amount of mortgage repayments per month are completely off. In fact, I'm starting to wonder if this may actually be made up!

If you only have one kid just get a 2 bed flat? You could get a fairly nice one for £400k in zone 3 and with £100k deposit your repayments would be around £1500 a month.

If you’re currently only able to save £1-200 pcm how on earth are you planning to fund the £800 shortfall for your mortgage payments? It’s not just the mortgage costs you’ll also be responsible for buildings insurance, sufficient life insurance to pay off your mortgage and any repairs. That’s without the one off costs of stamp duty, legal fees and removal costs. In my opinion it’s a non-starter.

These figures might help - we put aside £300-£400 a month for repairs, maintenance, replacing broken household items: £100 a month is repaying an interest free loan for that (for next 3 years). Supply and fit of a new toilet was close to £500. Getting overgrown trees cut back and removed £300. Removal and replacement of mouldy plaster £800.

Your interest costs are key - you might pay back 2x what you’re borrowing to buy the house. If you can get 20% loan to value instead of 19% you might get a cheaper rate, likewise if you have two incomes as it should be lower risk of default.

It’s important to factor in retirement as well including for your wife. Hopefully she has some state pension credits if she worked earlier in life or claimed child benefits, two salaries and buying a £500,000 vs £575,000 property would make a big difference - you could save on tax by putting more into your pension maybe if your wife was working. Instead of paying £150,000 (the £75,000 plus interest) on extra housing cost that money could go into retirement.

You could:
Run the calculation of how you’ll afford to maintain and run the house including estimated costs for council tax, bills, insurance, repairs etc.

Look at what adding a second income does to your figures. Get a second income before buying.

Look at buying towards the lower end of the budget, could you get a two bed place or one that is more basic and save on costs.

If you’re getting a 3+ bed home could you rent out a room to create extra income.

Numbers don't add up for me unless I'm missing something.

£4.2K net = £69K gross excluding pension
Got it 5.5x of my salary
69 x 5.5 = £379.5K

575K mortgage - that's a differential of £195K! A 575K mortgage on a 69K income actually means 8.3 x salary multiplier!

Even if you meant 575K house price minus 110k deposit = £465K mortgage - that is still a significant differential of £85K.
465K mortgage on 69K income is still a 6.7 x salary multiplier.

Regardless of the confusing numbers, I wouldn't be choosing to pay 58% of my net income on the mortgage. £2430 on a net income of £4200 is definitely not sustainable imo. Bills will inevitably be more - from council tax through to utility bills, etc. Back in the day that I was paying £1.8K on £5.5K net income, we decided we could afford to pay £2K pcm but definitely balked at paying more than that so we didn't! Unless it was an emergency (unforeseen redundancy), I would not chose to pay over 40% of net income on my monthly mortgage payment. I would save for longer/bigger deposit or buy a cheaper property or increase incomings/2nd job.

Do you get anything like child benefit or some other income? Has your wife not worked for a long time? Can she get a job in a supermarket or something to help out? Not sure I follow this.

I would see if you can find something cheaper- in terms of a mortgage rate and in terms of a house. Over half your income on mortgage alone is too much. For reference we pay about 30% and I'd advise not going above 45%. Speak to a mortgage broker about offers now that rates have come down and see what there is to buy that is £100k cheaper.

Why are you trying to buy a house you can't afford?

58 percent of take home pay is way way too high a proportion. Your wife needs to get a job or you need to find a cheaper house. I bet you have a really high percent rate on your mortgage. Is it a long term fix? If it's only a short fix or discounted what would you do if BoE put rates up again. With inflation likely to go up due to RR disastrous budget choices it's far too risky.

How many people actually rent out their spare room? I get it if you live on your own or even as a couple, but with kids? It's frequently suggested on mumsnet as a solution to financial difficulties but realistically, how many would actually rent out their spare room, share a bathroom etc with children in the house? And buying a house with a 13 yr old child, that in order to afford, you need to rent out a room to a stranger? That's awful advice. Just buy a smaller house!

Firstly find out how much your must haves are - council tax, gas, electric, food, water etc
then your wants - car, petrol, clubs, tv.
What’s left?
you need to know what it will cost you. If you only have £200/£300 left now with less rent how will you cover it all?

She lied about her previous positions. WTF rounds 6 years up to 10? RR worked in customer services and was forced to resign after continual absences she claimed were medical appointments but turned out she'd been out campaigning for Labour in her work time.

Only you and your wife know if you can manage. What are you spending on now, what is it possible to reduce? Many people live on that amount but they probably have very modest lives compared to what you are currently spending. 3 adults (or almost adults) living on that are going to have a very lean time. Take essential bills out of it (council tax, untilities, insurance, phones, travel) and you have an extremely tight budget for food, clothes etc. It probably means NO takeaway food or eating out, no luxury food purchases, scouring the shops for yellow label bargains. The minimum on new clothes for your ds, and pretty much nothing new for you and dw - just stuff from vinted. No holidays, and very few days out.

Are you sure you want your ds to live like that?

The good thing is that your dw isn't currently working, and is premumably in a potition to do so - no health issues etc? What can you / she do to increase the chance of her getting a job? Is she reluctant to do it? Has your dc got support needs? She would really see the difference that her wage would make to the life you could live - even if was only a takeaway once a month or a £20pm allowance for your dc.

Are you paying a lot into your mortgage or SAYE or something else?

on the figures/situation you gave I think it would pretty tight and there’s no buffer if interest rates go up again.

when you do your budget don’t forget to factor in savings for house maintenance- this can include short term things like plumbing or boiler breakdown and long rem things like new boiler/car so what you don’t spend thus year should roll over to the next. I read somewhere you should aim to save 1% of the value of your house each year for this.

Paying a lot into your pension

It’s a significant proportion of your income but you’d have £1,770 left to live.

presumably that’s doable, with no childcare and no debt (can’t imagine you have any if bank will lend at that rate)? Will you be paying less than your current rent?

if your wife is looking for work and going to find something in the future I wouldn’t be too worried in your shoes.

You may have an agreement in principle but I would bet my own house that it will never get to a formal mortgage offer, because you cannot afford it.

I really want to be optimistic but I’m finding it very very hard and would say, sadly, it’s not. Owning your own home is an incredibly expensive business - after bills, food, disposable income (holidays), insurances, cars etc, that salary is nowhere near enough. Our mortgage is very similar to that and we earn nearly three times as much. Our lifestyle is very comfortable but not extravagant. We’re about to spend £5k having the exterior painted, insurance (building and contents) has just cost £600 and a boiler service last week £100.

Repairs maintenance furniture ...insurances...you will soon be in trouble
Have you added up the council tax water energy bill insurances?

Buy a smaller property a flat. You do not need a "nice house"

Rule of thumb is mortgage payment should be max 1/3 of net income (google it). If your wife can get a job you should be able to afford it, if not then it’s probably not wise.

Absolite madness at this point in the cycle when the country is facing bankruptcy and the only way, except for interest rates is down.

A risk worth taking at the bottom of the market but we are three years away from that.

I recently used this budget planner from Martin Lewis’ website as my husband left 7 months ago and he won’t be paying the mortgage nor anything else. So I’m stuck with a £1370 monthly mortgage payment myself plus all bills, expenses etc (I earn 4k a month; no kids). It was really helpful to bite the bullet and enter all my income/outgoings on this and it then gives you an affordability bit in the final tab (calculates it all for you). Really useful tool (you need to download the Excel spreadsheet):
https://www.moneysavingexpert.com/banking/budget-planning/#spreadsheet