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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To think this is a massive mortgage?

139 replies

catsbananas · 04/05/2016 20:06

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?

OP posts:
Trills · 04/05/2016 21:52

Let's do some maths...

560k house
120k of equity
So 440k of mortgage

They are 40, call retirement age 65 although it's later than that now, so a 25 year term.

At 3% interest they'd pay just over £2000
(right now they'd probably pay no more than 2% with that sort of LTV)

Take home on 70k is just over £4000
Take home on 50k is just over £3,000.
So their combined take home money is £7,000.

So after paying their mortgage they'd have £5,000 for everything else.

If interest rates went up to 5%, their repayments would be £2,600, and they'd still have £4,400 for everything else.

If interest rates went up to 10%, they'd be paying £4,000 a month on their mortgage and they'd still have £3,000 for everything that's not mortgage. They'd have to cut down on other expenditure but I think they'd manage (unlike nearly everyone else!)

I think they'll be FINE.

(I'm ignoring pensions etc)

Sweettuth · 04/05/2016 22:01

toasted
Yes, you are right about the way things were in the 80's and 90's - even up to the very early 00's. Lenders were practically falling over themselves to offer a mortgage, sometimes at LTV 95%. However in the current climate, the regulations in place are incredibly tough. Lenders need multiple proof of income and long term security.

Pisssssedofff · 04/05/2016 22:04

It is a lot of money to pay off in less than 20 years. I'm shitting myself about taking on £150k

Trills · 04/05/2016 22:16

Why would they need to pay it off in less than 20 years if they are currently 40?

FunnysInLaJardin · 04/05/2016 22:23

we bring home around £6k pcm and our mortgage is £2700 pcm. We will work until we are 65 to pay it off and the house is worth around £650k. We have equity of around £250k. So for me its normal, but in different parts of the UK our set up is far from normal.

OP, your sister will be fine!

Trills · 04/05/2016 22:28

The whole thing about spending 1/3 of your income on mortgage is a bit silly really.

If your take home is £3k and you spend 1/3 on mortgage, you have £2k to spend on everything else.

If your take-home is £6k and you spend 1/3 on mortgage, you have £4k to spend on everything else - so why shouldn't you get a bigger or nicer or better-located house, spend £3k on your mortgage, and still have more spare money than the people in the scenario above?

JustHereForThePooStories · 04/05/2016 22:43

I think it's all relative. We (now) have a joint income of £145k and are 10 years into a mortgage of £425k. When we took on the mortgage, our combined income was c. £100k and our monthly repayments were £1,800, IIRC.
Currently, we pay £2,140 a month. It is an awful lot of money but to rent a similar property, we'd be paying closer to £2,700 and would be faced with the prospect of moving every few years as we'd get continually priced out of the rental market.

For us, the benefits in terms of location, being within very short walking distances of both of our jobs etc.

Our mortgage started when I was 23 though, I don't know if I'd be so willing to take that on at 40.

OnlyHereForTheCamping · 04/05/2016 22:56

It is massive, yanbu

happygoproperty · 04/05/2016 23:09

It's all relative

Doesn't sound a lot to me

We earn £180k and monthly income £10,500. Mortgage is £3,100 (on variable rate as moving soon) for £727k mortgage. We're 31 and 32.

Like others said you can always downsize - our 4 parents baby boomers all aged 60 and divorced remarried are doing that now, topping up pensions pots with £200k per couple

Why not really. You can always sell it. And if you lose your job and can't pay/ can't get another job for a long time, you lose whatever house u have eventually.

Xmasbaby11 · 04/05/2016 23:10

It sounds ok depending on other expenditure.

Our mortgage is 1/3 of our take home pay but childcare is 1/4, so we are really stretched.

dietcokeandwine · 04/05/2016 23:14

It's all relative OP as someone else has said.

If it's a level of debt they are comfortable with, and they have secured a mortgage from a reputable lender for that amount, then all good. Some people get really stressed about larger mortgages and others are fairly relaxed about them. Some people have a real issue about working past 60 and others are fairly relaxed about it. If you're the kind of person for whom an £80k mortgage keeps you awake at night, then yes this is massive. If you're not, and you live in an expensive area with high house prices, then it's fairly moderate.

We live in an area where house prices are pretty extortionate (3 bed terrace around £500-600k, detached 4/5 bed family home generally around the £1million + mark) and I read your OP and thought, 'yup, sounds reasonable'. The level of mortgage you describe is probably fairly typical for many living around here I'd guess. Ours is higher (although income higher too) and we are both mid 40s. We sleep at night quite comfortably.

gasman · 04/05/2016 23:23

I'm single. My income isn't a lot more than your BIL and my. Mortgage. My mortgage that I have no one to share with is only a little bit less......

I live in the SE though (and on,y have a one bed flat!)

GibbousHologram · 04/05/2016 23:35

It is massive, even if it's affordable. I wouldn't do it if there was another way (like staying put, or buying something that's £100k less).

However, when we were buying one thing that we thought about was that if one of us lost their job, we'd no more be able to pay back 3k than 4k.

Also, you don't need to pay it off, you just need to make repayments til you sell. So they could live in it for 10 years and sell it then if they wanted to retire early/cut back on hours or whatever.

I still wouldn't though, just too much money.

blindsider · 04/05/2016 23:44

Ii suspect the fact that Stamp duty is a significant factor in house purchases now they may be skipping a move and moving to their final house , more expensive in the short term but will save in the long run.

Sweettuth · 04/05/2016 23:52

Eh? Stamp duty is cheaper for primary homeowners. It's only second homes or bro that's subject to 3% rise. Sorry if I've misread your point...

Sweettuth · 04/05/2016 23:54

*Btl

Wagglebees · 05/05/2016 00:24

I think it's fine too. It's what they're choosing to prioritise, maybe you'd have different priorities like cars, holidays, retiring early or whatever but for them its their house that they're choosing. They are on very good salaries and that much for a 5 bed detached really is average around here and we're up North albeit in an expensive area but still.

For all you know, they've come into some money and don't want to tell anyone. I'm surprised you know how much they earn tbh. How did that come up in conversation?

ToffeeCrispy · 05/05/2016 01:48

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BarbaraofSeville · 05/05/2016 07:20

There's a lot of posters quite literally in bubbles on this thread.

'£440k a tiny mortgage' ShockHmm

'people with £800k mortgages and not massive salaries'

Um, to qualify for an £800k mortgage you would need an income of £200k+, which is firmly in the top 1% of incomes.

I've no idea if the OPs sister can comfortably afford the proposed mortgage or if they would qualify for it. I suppose these days it would depend on their outgoings .

If they had young DCs and paid a full time nanny, that would take up a large proportion of one of their take home salaries, which would hugely reduce what they could borrow.

But yes, £440k is a relatively massive mortgage, that a tiny percentage of people/couples would qualify for. Most people earn £20/30k at most and most mortgages are probably in the £100/200k level at the very most. The sister and BIL are both on well above average salaries.

Ours is actually less than our combined annual salaries but we don't have a big house in an expensive area, but it is still plenty enough for our needs.

LouBlue1507 · 05/05/2016 07:37

This thread made me more determined to do well in uni... My partner and I (both mature students) will have £15,000 between us this year (most of which we have to pay back) so I can only ever dream of being on such a high salary!

blindsider · 05/05/2016 07:39

Sweettuth

I wasn't thinking about the second homes addition but you are right, actually at that level of property the stamp duty has actually got cheaper. The point I was trying to make though is now stamp duty is particularly in the SE affecting people's thoughts about moving, when you have to shell out 100k to the government merely for the privilege of moving house. Sad

tobysmum77 · 05/05/2016 07:47

I think it is a massive mortgage too op. But we are all different, and as long as they can sleep at night that is all that matters.

Lightbulbon · 05/05/2016 07:48

Less than 4x income is fine esp when they have such high salaries.

DrWhy · 05/05/2016 07:53

sweettuth in Scotland the new land and property tax that has replaced stamp duty would have put up the stamp duty on that property by over a third if they are up here! It was a major factor in us stretching ourselves to buy our 'forever' home because we aren't going to spend £30k in stamp duty twice!
We have just taken on a mortgage of £320k on a £515 house and if/when my property finally sells will pay it down to £280k. The repayments will then be approx 20% of our joint income. The bank were happy to lend more but if one of us were to lose our jobs it would be approx 1/3rd of one or close to 40% of the other, given that both jobs are currently on the line again that's pretty scary. There were reasons we needed to move though so we have gone for it and crossed our fingers.

DiggersRest · 05/05/2016 08:07

When l remortgaged last year the mortgage advisor made a comment that it was a big mortgage, it was £155,000 and we're in London so l thought it was bloody tiny!