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.

I think it depends on what your income is and how stable that income is. We have a slightly smaller mortgage than this. But we could get by if one of us lost our job and got a £15k any kind of job. If both of us lost our jobs, we'd probably be filing for bankruptcy. But I don't think that's the end of the world (having had very irresponsible parents). I guess it depends on how much security you personally need. There is no certainty in today's world - what I mean is you can work hard and it may fall apart anyway. If you don't take risks you won't get anywhere. it's a choice I supppose.

Exactly chestnut.

We didn't do it overnight. It's taken years but I totally agree you cannot take on that level of debt without a buffer.

Probably should also consider how much equity you will have on it, if its mostly mortgage you are at risk of being trapped if the market falls further owing more than the house is worth, loads in that situation now. I am aware I am overly cautious with things like that but Id want at least 25 % equity.

Oooh, Xenia, you must be so wealthy to be in so much debt.

To answer the OP, we took out a 36K mortgage over 18 years, 8 years ago. By overpaying, we've got that down to 19K and hope to get rid of it in the next couple of years. We could afford a much larger mortgage on DH's salary, but haven't actually seen anything that would make us want to take on that extra debt.

I have a lot of children, am healthy and happy. That's the real wealth. I wouldn't say I'm wealthy. So far in my 40s the bank has been prepared to allow me a loan of that amount to fund my husband's financial demands on the divorec. I'm not sure if that makes me wealthy.

Depends completely on your income (and likely future income) as everyone else has said.

So, we have a mortgage which is about 1.5x our combined annual income at the moment. Our monthly (interest only) payments are only about 10% of our net monthly pay.

However:

• we don't have DCs yet, when we do our outgoings will go up
• I'm likely to earn less in the future (once we have DCs)
• DH's job isn't totally secure and/or he may want to do something less well paid in future
• interest rates will only go up

So while our mortgage looks very affordable at the moment, we know we have to spend this time overpaying, so that it's smaller by the time things look a bit leaner.

Very sensible, minipie.

We had paid off mortgage on 'starter home', bought a larger house and paid that off before we had DD. Obviously this was easier to do in 1985/1995 than it is now because house prices were reasonable then (they are still too high now relative to salaries) but this approach worked well for us. Overstretching isn't a good idea - even paying the max you think is affordable probably isn't wise till you're sure the market has bottomed.

I'm a natural pessimist Grimma so caution comes easily

of course if the market shoots up we'll probably end up regretting we didn't stretch more...

Interest rates are so low at the moment - do you have enough leeway if they rise?

When we went into ours we did it with the intention of overpaying each month, which we have done for 8 years. The benefit of this is it brings down the overall term of the mortgage, but allows some leeway (a mortgage break) if you get into difficulties and can't afford it for a period of time. This is great peace of mind. Also it means we pay significantly less interest over the term of the mortgage than we would have if we'd just paid base rate. In 2003 our mortgage was £130k but is now about £80k IIRC. Our mentality is such that we'd rather go without luxuries and get the mortgage paid off ASAP.

Easy to do at the mo as we are DINK'ies, but next year we'll be OIOKs so we'll probably be grateful for the leeway.

of course if the market shoots up we'll probably end up regretting we didn't stretch more

we've seen prices roll up - and down - a few times which I think has quashed that thought. The house we've got is big enough for us, and in a location which suits us. A house is a place to live, NOT an investment. It is an asset which should keep abreast of salary rises but no more. The moment it does - beware.

Interest rates aren't actually that low at the moment if you don't have a large deposit / little equity. When we bought our house last year, the best deal we could get was a variable 4.5% tracker, which is a ridiculous margin above the base rate, but we 'only' had a 15% deposit. We borrowed just over 4 times my income, ignoring DH's income as he is on a contract whereas I had a permanent job at the time. It was about 2.5 times our joint income. Stretching to a 25% deposit would have cleaned us out of savings and wouldn't have gained us that much in terms of the interest rate anyway as you have to have a 40% deposit to get the best rates.

So I would say that overloading your income multiples on the mortgage is not a great idea unless you have a very secure income and some other savings as a buffer.

In the year since we bought, for example, I have had to leave my job (sham / discriminatory redundancy process and outcome was a settlement negotiated via a solicitor) so we're down one income but because we didn't overstretch on the mortgage and kept a chunk of money aside we have a buffer now - and with our first child on the way, we really need it! If we had overstretched ourselves and if I'd then just lost my job fairly, not illegally, it would have been a nightmare. As things were, I went through huge stress negotiating the settlement with my former employer to make sure I got financial redress because otherwise I would have been out of work and unemployable while pregnant with a mortgage to pay that DH's income would cover, but without much left to live on. A year ago I had no inkling my job was even under threat so I guess the moral of the story is - expect the unexpected and factor it in.

We have a mortgage of £400,000 slightly in negative equity. If one of us lost the job we would not be able to continue paying mortage once savings = to 6 months of mortgae were used up. But we both already commute 3 hours a day to and from work if we had a smaller mortage it would mean living even further away from work or living in an unsafe area, so in a way we had no choice. We both have critical illness cover and life assurance via employers.

should add mortgage each month is equal to third of both mine and DH gross pay.

Please be aware that the low interest rates could change very quickly.
We bought in the late 80's when rates were 'low' at 7%.

They rapidly rose to 17.5% and stayed there for 3 months, we lived off pasta and store cupboard foods for that time. Our payments trebled.

22 years later we're still in our terrace house, it's too small but I'd rather stay here than go back to having no money for food, especially with having DD.

Yes I remember paying 12%. I think I was comparing my situation in 1984/5 buying first house and my daughter now. I think I pay 3.1% at the moment but if my daughter buys now she will be paying the sort of rate Inmyprime mentions and rates may well go up. It depends on your security in terms of job, if you're in a profession where your wages will rise regularly, if you h ave a personality for risk or not.

how many times your salery would the mortage be?

we have gone without luxuries to have our house. we eat healthily, drive an old banger and do cheap camping UK hols. i really don't mind living on a budget at all and know we will be much better off in a few years.