To ask about your mortgages?

[Mare11bp]

We are interested in a house but have worked out that if we go to close to their asking price, we will have a mortgage of about 260k over 25 years, but we may up it to 30.

Is it affordable? Probably just about. Does it scare the shit out of me? Yes.

So does anybody mind me asking about the level of your mortgage?

Bit of background - East Anglia, semi-rural area and relatively expensive. It will not be buying us a mansion but a family home.

If you can fix for 5 years then do. Undoubtedly rates will be higher once you the come off your fixed rate, but it gives you stability for a good while, and as you say you are likely to haves higher income.

Fixed rates always work in the favour of the lender and 5th fixed rates below 5% are few and far between at the moment.

We were advised to take out a tracker mortgage which is 2.9% above base rate and overpay it like hell! The monthly repayments are well within our affordability range and we aim (we move next week) to overpay every month by about £1k. We've taken the mortgage out over 30 years to bring the repayments down as low as possible, but have worked out that if we overpay at this rate the mortgage will be paid off in less than half that time.

CaveMum that is all very well if you can afford it comfortably, but if things are tight then a fixed provides a stable situation for the OP while her kids are small and they have the childcare costs to contend with.

Sorry, not sure what that random 5th is about

I also hit post too soon: I wanted to say that our method only works if you have enough of a buffer to absorb some rate rises and are disciplined in paying off the extra every month. Our deal is for 2 years, from the people we have spoken to rates are unlikely to rise in the next year and when they do go up they are likely to be small increments. We are prepared and able to take the risk and if things do look like they are going to get bad we will switch to a fixed at the end of our current deal.

Did you not work out what price you could go up to before you started looking for a house?

If you are able to find a house which would give you some flexibility for working patterns and some leeway should one of you be unable to work then I think your quality of life will be better.

The children are in nursery now which is an expense but once they start school it becomes much harder to manage your time (school holidays, wanting to be at school events or with the children after school) and you might be very frustrated to find you can't remain part time because you've taken on a slightly too large mortgage.

mare11bp we have 258k on mortgage. I had many sleepless nights when deciding to buy this place. We originally put in an offer of 304k (house originally on at 379k pre recession) and the owners rejected it, we then thought it was just that step too far anyway. The estate agent came back a few days later and said they had changed their minds and would accept. We said no we felt it just too bigger mortgage. Anyway a few weeks after we had a call from the agent to say they had just reduced to 299k, we ended up offering 295k which got accepted. It's a very scary size mortgage, even now it really worries me. If I was in the same position again I am not sure I would buy it, at the end of the day there is more to life than just paying a mortgage.
However it was the house of my dreams :) and I still get a thrill when I drive up (the 140ft) drive!! Just think about how much disposable income you would have left each month :o

I wouldn't do anything that will mean you don't have a good safe margin of error at the moment. Property is going to go down further. Interest rates are going to go up. I think utilities and petrol will also go up.

It sounds like you really want permission to buy this house. The fact that you could go fulltime is good. Fixed rate is good. Are you renting at the moment?

It's not a lot of help to you to tell you what our mortgage was; we bought in 1998 with a mortgage of $AU90K, which back then was about 35K in pounds, and paid it off, then upgraded but not by a huge amount, so we've never had a mortgage greater than $AU100K. When we buy again, I'm willing to take on a maximum mortgage, including stamp duty and mortgage costs, of double our combined gross salary. One of our rules is, make sure we can meet all financial obligations on one salary if need be. That recession-proofs us quite effectively.

As theroost says, it's not just about the house. We took on a mortgage of about 1/2 of what we could have taken and although our house (15 years later) is too small for our family of four, I do not regret that we did not buy a larger home at that time. We've travelled and both been able to work part time which has been wonderful for the children.

I absolutely agree, and i think said further up the thread that you need to be able to absorb rate rises. We can still afford our mortgage if rates go to 8% without cutting back on other spending.

I have also been told by some on the inside that rates are unlikely to rise before next year and will move slowly when they do. We are also overpaying like mad while the going is good.

Its not just the mortgage on a higher value house though is it? We live in a rural area and the rates are £225 per month and during the winter oil is now an unbelievable £300 per 500 litres (minimum order). It was £120 per orde when we moved in. We have no gas. Coal (better quality) is also around £50 per month. Also if you have a septic tank there are additional costs as well.

I'm sure you will have factored these horrors into the equation.

I'd definitely put in a lower offer if, as you say, it's been on the market twice. They can only say no. Our dream house is up for £245k, we're going to put in an offer of £180k and leave it on the table. It's a new build and I know that the building company hasn't sold any for a while. Worth a punt.

i took out a mortgage when i was 19 for 25 years. Just about paid it off now (after a few add ons thru the years) and am just about finished this year, paying £24 a month. Will have a little nest egg to sell and go abroad to retire with :)

there were times though when the interest rates went up to 16% and we were hanging on by our fingernails to our house

Our mortgage is horrific and I don't think about it too much. however, it is affordable for us, and both of us work in good jobs. If we rented it out (which we have done), the incomet would cover the mortgage. There is some margin for interest rates...but we will be fixing in teh coming months. I don't think there is any rush (interest rates are likely to remain as are for the next 6 - 12 months, but come the Autumn we will go for a 5 year fix. In 5 years, things may be a lot higher interest rate wise, but I would hope that my salary would have increased and we would be able to cover the additional amount. Plus do consider whether you will be able to overpay...we have done this and it reduces the amount by a considerable margin. DH may look at redundancy in the near future and the lump sum he would get would make a huge difference.

When we bought our first home 14 years ago it was 3.5 X your annual salary for one wage and then my yearly wage added to it.

We upped the mortgage to move here. Now we have an 80K mortgage with 11 years left to run. It's a quarter of dh's take home pay per month and is a repayments mortgage.

I remember our financial advisor saying we were being sensible as many people were being granted 8 x their salaries and she reckoned one day they'd struggle if they weren't careful and that she felt the banks were being silly too.

I'm still reeling from someone's comment on the first page, that you should have 6 months living costs in savings!! I know that'd be lovely, but how many people do? It seems totally unimaginable to even consider having that much surplus....

many people these days are living from one wage packet to the next

having 6 months living expenses just hanging around is a privelige for the very few, IME

Lucy when we brought our house, the first thing we did was save as hard as we could to get 6 months savings put to one side. We have it in a ISA and add at least one weeks wage to it every year. That is also why we pay £40 a month for Bill Ins (I think it is called Income Insurance) it would give us £600 a month enough to pay heating, water and rates every month with a little left over. But, I am a belt and braces sort of person.

Our savings would also cover 6 months of both of us being unemployed. It's not as much as I'd like and have agreed a frugal Christmas to replenish what we've dipped into earlier this year to cover DH when he was out of work. I like having a "buffer".

Have a look at rentals. Semi-rural East Anglia must be cheap. That way, if either of you loses your job you will be able to stay where you are.

Buying property is soooo 1980s.

Depends what you earn, surely?
Mine is over £1m (never divorce someone who earns a lot less than you do whcih is the only reason I have a mortgage)

If you do decide to buy, make sure you factor in the likely appreciation or possible depreciation of the property. Work this out over a 5 year period.

Lucy we have 50% of DH's wage saved but we'll use that as our deposit and then will build it up again. I do strongly believe you should always have a 6 month buffer.

you can "strongly believe" it as much as you like, mate, for many people it just ain't possible

you can take out a lower mortgage to habve a 6 month net income buffer. What happens if redundancy (with a buffer you don't need to take insurance IMO), or the roof needs fixing, or a major repair, or one of the cars engine fails. If you can afford a mortgage you can afford a 6 month buffer. For us a 6 month buffer is alot of money and it is in ISAs and/or shares. Not having one leads to the real possibility of reposessions. You can also create a buffer by overpaying your mortgage so you can do it slowly.