To think this is a massive mortgage?

[catsbananas]

Just wondering if I am completely out of touch here. My sister emailed me today with a link to a house she is buying. They are moving from a house they have just sold for £250k, a pretty ordinary three bed semi. The new house is a detached five bed, which they are buying for £560k. I knew they wanted to move to something a bit more "forever home" but am honestly shocked at the price. Both work in the public sector, he in a managerial role in the health field on about £70k and she as a lecturer on about £50k and they are both 40. They have accumulated about £120k worth of equity in the old house. Yes, I know it isn't really any of my business but I was surprised that they are taking on this kind of debt. I wouldn't be able to sleep at night and the combined income of me and DH is only a bit lower. AIBU or is this a massive mortgage?

the way property prices are climbing it's not a bad idea to put your money in something you use every day.

i would love to buy our forever home. but in SW London a 3 bed semi costs over a million. sigh.

yes SW london
i know people with £800k mortgages and not massive salaries.
truly depressing.

If they're earning about £120k and only have a mortgage of £130k, then surely they must have built up a fair amount of savings over the past few years so it is unlikely that they will be taking out a £440k mortgage. If they haven't saved while on these very healthy salaries and with very low outgoings, then YANBU to think that they are getting into far too much debt.

I actually think that's pretty cheap for a 5-bed! But then I'm thinking London prices. It's all relative and all about your attitude to risk. Our first place, on starting salaries that were low, had a mortgage of around 5x our joint income. It was 2007 so mortgages were far easier to come by than now. We also had a decent deposit. Roll on not even a decade and it's doubled in value, leaving us with £200,000+ of equity once sale costs and so on are paid. Turned out ok for me!

I think if you live in an area where houses sell quickly, why not live in a bigger house that you won't ultimately be able to afford long term, whilst your dc need the space. For 8 years, for 10 years or whatever. The bigger risk you take in some areas, the more equity you make. I think we made a mistake being conservative with our first property. If we'd gone for the most we could afford, we'd have made double the equity we did. You don't have to stay there forever. You might just want more space for a short period of time, whilst you're earning well.

I think it's a big mortgage OP. DH and I earn combined salaries of £100k. We take home £5k after childcare costs (pay with vouchers). We've just taken on a mortgage of £260k which is £1100 a month. We could afford more but we also like holidays and being 'comfortable' (plus we save a lot). I guess it depends on their priorities. We have friends who have clearly stretched themselves but the house/status is more important than holidays and they're happy to do without them. They might struggle if rates go up. Long term average rate is 5% so you should always check you can afford a mortgage at 5%.

Our household income is more than theirs by some way and I would never consider a mortgage that size. However we do support a DC at university and pay school fees for two more so if they are childless they'll probably be paying out less than couples of similar ages (we're early 40s but were very young parents) with DC to support I suppose.

My other observation would be that at 40 and with the salaries they have they've built up startlingly little equity. They may feel that with interest rates low this represents the best way to build for the future now.

Doesn't seem bad to me - yes it's a lot of debt but we'll all be working til our late 60s so why not live somewhere you love? That's what most of us are working for, paying housing and childcare costs for the most part. We're 4x joint salary and won't be going on holiday until our childcare costs decrease but worth it to get what we want housing wise. It's not about status we get a lot of utility from having a nice place.

I agree with OP. It's a huge amount of debt to take on. What if one person falls ill? That's the house up for sale straight away.

£1m for this

I read things like this and an eternally grateful the most we ever paid was a 60k mortgage. I don't know how people do it there days!

It's a funny one OP

To me, it's a lot

But I also know it is quite normal, these days, esp. considering their equity and salary.

I have friends, mid forties, who have a 600k mortgage, I am always glad I am not them.

They are probably glad they are not us though and may feel sorry for us in our new built semi (vs their grade II listed detached!) .

Horses, courses etc.

I was able (after a decade of working bloody sweat and tears) to buy first home with OH when we were both 35. OH and I were cautious about how much to borrow having witnessed the devastating consequences of the property crash circa 07 and therefore, despite being technically eligible for 1m mortgage between the two of us, we opted for a mortgage of just over 100k. Fast forward a few years, we now know that had we been brave enough to take a bigger mortgage we would have been ridiculously quids in, in terms of equity for remortgaging or selling up and buying a new place. Not that it's a problem or something we stress about - we love our little home and of course have the option of moving somewhere bigger/better area if we want to. But I digress. The point is that if your sister has been approved by the mortgage lender then the risks have been considered and deemed safe. I wonder if there's more complexity to your question...sibling rivalry for example?

OH became DH a few years later so now own house as tenants in law

I think it's HUGE but it's all relative. When we bought this cottage we had to borrow about 50k and had awful sleepless nights over the debt. Fifteen years ago! A 500k mortgage seems almost an everyday thing nowadays

Yes, it's a very large mortgage. It's easily manageable on their current salaries, but it's still a lot of money to be committing themselves to pay for a period that will probably cover much of their remaining working lives. It's a risk to take on any borrowing that presumes you'll both be able to continue earning quite substantially throughout middle age and into the 60s. There's a certain amount of insurance available against things like sickness, but it doesn't cover every income shredding eventuality, and doesn't always pay out either. That inevitably makes their purchase a risky one. On the other hand, for better or worse that level of borrowing is increasingly normal, and could still prove to be a sound investment. The two things aren't mutually exclusive.

Well when we Bouygues our house, we had the same attitude than the OP. We bought one that we could afford on one salary.
Which is good because we did end up on one salary.

However, depending on where you live, I'm aware that we would probably have had no other choice than taking on a much bigger mortgage that required both our wages....

Our mortgage was similar when we bought the house. We weren't worried about it as monthly repayments were more than manageable on either salary (DP super risk averse so needed to make sure) should one of us lose our jobs (thankfully we're both still gainfully employed!).

If they can manage, good for them. If they can't, worse case they'll have to sell.

Don't worry about their debt, you'll drive yourself crazy. Wish them well.

And for the PP who has a £1.8million mortgage (I think I read that), holy cow!!

Thanks all, that's an interesting variety of perspectives. I am honestly not envious of them and we could probably get a mortgage for something similar but it wouldn't occur to me to take on that kind of debt unless I really had to (we are not in a really expensive area). I'm quite keen on paying down the mortgage and being able to semi-retire at an earlier age. I'm not going to interfere with her choice or interfere in any way, I just gasped at the figure and questioned my response. I see what other posters have said, yes its a large amount but also yes its quite common nowadays.

They can obviously afford it if they've been accepted for a mortgage

That's usually how naïve people get themselves into trouble

Nearly 30 years ago back in the eighties, people would collude with their boss to lie about their income so they could get a bigger mortgage. I'm not saying this has happened here, however.

Perhaps you don't know as much about their financial situation as you think you do. Perhaps they overpaid their mortgage and have more equity than they are telling you about.

I've inherited money and our mortgage is paid off. Nobody knows that except my brother and my Mum.

So they want to invest in property. I'm genuinely not sure why this bothers you or why you are posting about it.

I think if mortgage rates go up to 5% then a lot of us will be sunk. I am a lone parent with a mortgage of £200k. It's a lot, but less than rent on the same house- and while it feels a big debt, at least I know if it all went wrong I could sell it and move somewhere smaller rather than be living somewhere more affordable all the time!

If the kids are living here when they're older they can help me with the mortgage; if they're not I'll sell up and move to my (smaller) forever home

I wouldn't be able to sleep at night with a mortgage that size.

I have seen house prices go down as well as increase.

I would hate to be repaying a mortgage that size if the house had slid into negative equity.

Maybe they do have more equity than they're letting on. 120k doesn't seem that massive for people on such good salaries who are old enough to have got on the ladder a while ago, though of course there might be lots of reasons why they didn't.