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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To think my DB shouldn't worry as much he does re: mortgage size?

31 replies

ShellyBoobs · 04/12/2011 15:17

My brother is looking to build or buy another house - not an extra one, just a different one to his current home.

He would really like to have a place with things like a large open-plan kitchen diner for entertaining etc, which isn't achieveable with his current place. He's decided to either sell then buy some land to build on (a plot would be circa £100k where is) or buy something already suitable or which could be internally modified easily.

He is quite open about his financial situation and has asked what I think he should spend, or rather what I would consider a reasonable limit. I thought that borrowing £100k or more would be perfectly reasonable, but he thinks it's too much and too risky.

He thinks he shouldn't borrow more than about £60-70k which wouldn't get him what he really wants. I think he could easily go higher. Obviously his own attitude to risk is important and I would hate to pressure him into borrowing too much, but he asked my opinion so I gave it.

His situation is this:
He's 39, currently single with no DCs
Earns around £35k and takes home around £2000 p/month net of pension etc. He's well qualified and even if he lost his job (unlikely at the moment) any other similar position would pay the same or more.
Equity in his current home is circa £150k.
He isn't extravagant and doesn't have other loans, debts or expensive lifestyle things to fund.

What do MNers think? AIBU to tell him think he could stretch to more than he wants borrow, if he chose to do so, and therefore get the house he wants rather than one that's just adequate?

OP posts:
noddyholder · 04/12/2011 15:18

He sounds sensible looking at the economy

mumblechum1 · 04/12/2011 15:19

If he's only earning £35k I don't think he should borrow more than £100k to be honest, but I don't get why he only wants to borrow £60 to £70k if it won't cover what he wants to do.

HecateGoddessOfTheNight · 04/12/2011 15:20

I think that it has to be his decision, since he's the one saddled with the debt and if you try to influence him one way or the other, and it goes tits up - he'll blame you!

I think you should run through the pros and cons and do no more than say well, you'll have to decide which matters more - lower mortgage or ideal home.

And let him get on with it Grin

Meglet · 04/12/2011 15:20

In this day and age he needs to be sensible IMO.

He doesn't have DC's yet, if kids come along they cost ££££.

And there's no guarantee of finding a job in a similar position.

Original poster
ShellyBoobs · 04/12/2011 15:21

...I don't get why he only wants to borrow £60 to £70k if it won't cover what he wants to do.

That's my point, tbh. If he's going to move and end up with something that's not what he really wants, what's the point? Confused

OP posts:
WorraLiberty · 04/12/2011 15:22

I don't know

Part of me thinks that if he has to ask other people's opinions, he's probably not ready to commit to this.

He should be looking into it and borrowing what he feels comfortable with, no matter what anyone else thinks.

HappyCamel · 04/12/2011 15:22

100k mortgage could be about £700 a month, plus council tax and bills more than half his salary would be on housing. That's at a 5% interest rate. For a £35k job he'll only just be taking home £2k month. At 39 he wont get a 30 year term. Sorry, I think he's right.

Original poster
ShellyBoobs · 04/12/2011 15:23

And there's no guarantee of finding a job in a similar position.

Yes, that's true of course.

OP posts:
Original poster
ShellyBoobs · 04/12/2011 15:31

HappyCamel, I think what you're saying is very sensible re: 5% interest rate.

He's talking about the current 2.59% HSBC rate, which is about £450 per month for £100k.

I suppose there's no guarantee of how long that will last though, of course.

OP posts:
Groovee · 04/12/2011 15:31

I wish they would go back to the only borrowing 3.5 times your annual salary. This is why this country is in such a mess.

chrimblycompo · 04/12/2011 15:34

39? I'd tell him to stay where he is tbh

Original poster
ShellyBoobs · 04/12/2011 15:35

I thought they still did limit to 3.5 x salary?

If he borrowed 3.5 x £35k, it's a lot more than we're talking about here.

OP posts:
Original poster
ShellyBoobs · 04/12/2011 15:36

39? I'd tell him to stay where he is tbh

Not sure what you mean?

He's too old to move? Confused

OP posts:
MyChildDoesntNeedSleepAtXmas · 04/12/2011 15:37

I usually go by 'three times salary', which would be £105K.

EssentialFattyAcid · 04/12/2011 15:38

I would stay out of this decision tbh

MyChildDoesntNeedSleepAtXmas · 04/12/2011 15:38

chrimblycompo

?

Original poster
ShellyBoobs · 04/12/2011 15:41

I would stay out of this decision tbh

I know. I should. But he's my brother and obviously I'm here to talk to so I don't want to just say 'I don't know'.

The thing is, if he goes to see a mortgage advisor, he knows they'll try to encourage him to borrow more so he's asking for advice which is impartial.

OP posts:
callmemrs · 04/12/2011 15:47

I think while he could borrow 100k on his current salary, the issue is more about how his plans might change in the future. If he meets someone and has kids, then suddenly you're looking at childcare costs, or running a family on a sole income which is an entirely different ball game to being single. Everything will cost more, food, heating etc

Also at almost 40, what are his long term plans? Would he be looking to try to get a 25 yr mortgage term and work full time to 65? Does he have pension arrangements? Will he be able to cope with the increased costs of running a bigger home if he retires?

Tbh I don't think they're your questions to answer, but if he's asking advice, I think the best thing is to think through the possible future scenarios. If he remains single and carries on in this job, and simply wants to build his ideal home, then yes, its do-able. If his circumstances change (oh and bearing in mind interest rates WILL shoot up again at some point) I would say 100k would be the absolute limit on borrowing, and indeed he may want to look to try to increase his earning.

AurraSing · 04/12/2011 15:51

With £150k equity and £70k mortgage can he buy what he wants? If so, I would stick with that. Then he has room to breathe if interest rates double.

It's all very well to say borrow the extra £30k, but if it doesn't buy that much more house, is it worth the extra stress of paying a big mortgage? And generally the bigger % deposit you have, the better rate of interest you can get.

Original poster
ShellyBoobs · 04/12/2011 16:02

Thanks callmemrs.

He's got a good pension provision and also some investments that I know of. He also has significant savings but won't touch them to partially fund a house move because they're 'for the future'.

I don't like to think of DB spending his whole working life saving and investing 'for the future' rather than living for the moment a little more.

Without going into great detail we had a poor upbringing, both in financial terms and in the way of having pretty crap parents. I still tend to be overly cautious with money, even though OH and I are reasonably well off, and I know that DB feels the same when we talk about things - we have a probably irrational fear of being very poor again.

OP posts:
Original poster
ShellyBoobs · 04/12/2011 16:05

With £150k equity and £70k mortgage can he buy what he wants?

That's the thing; he needs around £240-250k from what he's seen, really.

With things as they are though, maybe the £250k houses will be nearer £220k soon...

OP posts:
ouryve · 04/12/2011 16:17

Surely it's his business how much debt he's willing to take on.

valiumredhead · 04/12/2011 16:49

I cannot imagine being this involved in my brother's finances tbh -leave him to it!

eurochick · 04/12/2011 16:53

I wouldn't have any concern personally about taking on a mortgage up to 3.5 times my salary in my late 30s and I consider myself to be fairly conservative about finances. Your brother should look at things like what the monthly repayment would be if interest rates ended up at the highest he things is possible (in recent history 15% has been seen in the UK) and consider whether he could afford that if he really had to for a while. Or he could look at a 5 year fix so he knows what the rates will be until 2016, by which time hopefully the economy will be in distinctly better shape than it is now. The rate will be higher than the 2.whatever rate he has seen but at least he will know how much he has to pay each month for the next 5 years.

But of course it is his decision as it is him who is taking the risk, not more.

lljkk · 04/12/2011 16:53

Agree Valium, Beak out OP.