Would you/did you borrow to your max for a mortgage?

[LLK12]

Hi,

We're currently in the process of getting on the market, so we are right at the beginning of the process. Not looking forward to the stress of it all 😬 but it's definitely the right time for us to take the plunge.

To the original question- I know the general consensus would be absolutely not! Never borrow fo your max. However, our situation is, our household income is almost certain to rise quite quickly, as I'm due to go back to work in the next year and DP is in a very senior role in a fast growing sector, so career progression has been fast and should continue to be. Salary increases are fairly regular, with guaranteed bonuses, so we feel the risk would be lower.

That said, I'm also very aware that nothing is guaranteed, so bearing that in mind, does anyone ever borrow to the max?

Be really interested to hear your thoughts and personal experiences.

Thanks 😊

Some people will especially if areas where property prices are high and in your situation where you know your income is going to rise then I think it’s fine. We didn’t because we knew we were having another child and we had a lot of other large expenses to consider.

I did about 5 years ago. Had to, to get my place in an expensive part of London. But have had various promotions and chunky pay rises in interim so that payments now feel v reasonable, and have been able to overpay substantially.

If it is likely that your incomes will keep growing and your jobs are reasonably secure in the current climate (and your other outgoings are unlikely to increase much), then I wouldn't be too nervous.

We weighed this up last year. DH had just got a major promotion and my industry was huge and I was very in demand. We decided to be careful and buy a cheaper house. Good job we did. A year later DH lost his job and had to take a pay cut back to his previous role and my industry collapsed due to AI.

Yes for first house - late 20s, entry level jobs, could reasonably assume increases for both of us.
Yes for 2nd house - early 30s rising market, up and coming area, stable jobs with potential for promotion
No for 3rd (and final!) house - late 30s/early 40s, everything less stable (thanks covid!), need to prioritise becoming mortgage free and pensions, stagnant market.
HUGE caveat - our max has always been 3.5 times combined salary and at least 10% deposit. Anything else feels way too stressful for us/our collective risk appetite

I totally overstretched myself in my early 30s but now I'm mid 40s I'm totally glad I did! It was a risk but it all worked out. Only you'll know if it is the right decision for you in terms of your earning potential, age, circumstances, etc.

No because I was/am a single parent and was wary of only one income, so glad I didn't because I had a routine operation that went wrong, ended up disabled and unable to work. Because I had a small mortgage I was able to keep the roof over my head with an ill health pension (which was about half my wage).
In situations like mine whereby your 'illness' is not on the list covered by critical illness cover you are in a difficult situation. Look at what insurance you take out my mortgage protection insurance saved us from becoming homeless in that first year before my pension kicked in.
You always hope that nothing happens but you just don't know whats around the corner.

My husband is a financial adviser and has had far too many clients who borrow to the max, certain it’s not an issue for them because their wages are definitely going up/there’s definitely a promotion/there’s a new job coming X, and seen shit hit the fan, for us to ever even consider risking it.

Yes, we did do about 18 years ago as that was the only way to get onto the property ladder and the mortgage was cheaper than renting.

We have moved a few times since then, but resisted going to the maximum offered by the bank and it seemed an unnecessary risk.

If you can afford the repayment and can imagine that the repayment will stay affordable, even if the interests rates rise again by a few percent, then it should be ok. If the repayments look crippling, I would say look for cheaper properties.

I live north of London and grew up in cambridge

I Am pretty sure most people I know borrowed to the max, certainly in the beginning. It’s only the last few years that we have not needed to do this due to increased property value change the LTV.

I dont think it’s unusual at all.

I think this is often missed. The long term impacts of early maxing out can be very positive

I did this in early 40s and I feel really mixed about it. On the plus side I have a really nice house in a phenomenal part of London close to target schools and our jobs so commute is minimal. It’s zoomed up in value and we’ve both received good payrises so it’s all affordable and manageable. However I did not realise that my 50s would feel so late in the day. I’ve got a good pension but I’d really like to be building a bigger savings pot and to be able to retire in 10 years and I’m not sure that’s doable. I think I’d do the same again but I should’ve thought more about how it would feel to have a big mortgage at 50.

no I think our max borrowing offer was for 520,000, we borrowed 399,000 on a house worth 500k

We have and so far don’t regret it. It’s enabled us to buy a house in a location we can walk everywhere, and are 5 mins from outstanding schools.

The day to day positive impact of that is worth it.

Also the amount you borrow is fixed, but wages should at least go up with inflation, so even with no pay rises the amount you owe by comparison will reduce over time.

We’ve borrowed to very close to our max. We live in London and it’s basically impossible to stay where we are (upsize from a flat to a house) without maxing ourselves out. We love the area and love our DD’s school, there’s a great community of friends and moving to another area we don’t know wasn’t really something we considered.

I thought the general advice was borrow as much as you can for as long as you can?

I've had mortgages for 20 years and my fixed interest rates have ranged between 1.2 to 5.6% in that time. It's really important to consider affordability over the long term, and at various interest rates.

You also need to consider how you would pay your mortgage if one or both of you were not working - redundancy, illness, accident etc - lots can happen in life especially over the decades of a mortgage. Insurance products exist.

For us, it's worked well that we didn't max ourselves out - since we bought our current home 10 years ago we've had interest rate increases, maternity leave, nursery costs, redundancy - and through it all we've never once had to worry that we can't afford our home. That's worth a lot to me, but everyone's circumstances and attitude to risk are different.

We have a LTV of 70% so I don’t know if that makes a difference to what people consider maxing yourself out to be.

Yes we did (18 years ago). It was fine due to a promotion soon after.

We were lucky enough to afford a nice detached house in a good area on the 3.5 combined wage scale. Offered a lot more by the mortgage brokers but having a smaller mortgage as our wages increased in our 30s meant I could give up work for a few years when the children were little.
I returned to my industry on reduced hours and was able to plough a lot into my pension resulting in retirement at 55, husband has been able to go part time.
Being mortgage free gives you so many choices later in life.

All that said if you aren’t planning children for a while your early 30s is the time you can take risks.

No. Took about a third of what was offered as we wanted to make sure we could manage on one income if necessary. Worked out to be a solid decision.

Personally, no. I think it’s always nice to have options and to be able to save adequately and also live a certain lifestyle. Plus, if you don’t yet have children or want more in the future that’s a huge thing to consider as childcare is expensive (and so is just raising children generally).

Yes my DH and I did it three times because of the high odds of his salary going up.

Yes for sure. It's always difficult to get on the ladder but it usually makes sense to get the best you can afford.

No

partly because i could afford a house I was happy to live in - if you are buying something you know you will have to upgrade from , a stop gap -pushing makes a bit more sense

I just have modest tastes in houses - why have 3 beds if 2 is enough. Why get period features and a large garden that are expensive and time consuming to maintain?

i have enjoyed a less stress filled life as a result - many colleagues bought more expensive, life was always a little tougher as a result and there is a problem shifting those houses in this rough market

Yes on house number 1 (upgrading from a flat) as I had been offered a promotion but not actually started it.

No when we bought the current house. Bank offered to lend us half a million pounds which I thought was wild! We borrowed £300k on a house we bought for £400k and is now worth £800k. So a good investment but even better we’ll pay the mortgage off in about 18 months and I’ll still be late 40s. I wouldn’t have been comfortable having a large mortgage in my 50s and the lower payments enabled us to over pay - which we did every time we got a pay rise.