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?

(Sorry, I meant to say 'where you can make a full recovery if you are lucky').

Sounds like it is well within their budget considering their salaries. It is an investment and they can sell it if they find it too much. Also, at their age it is the last time they can get a 25 year mortgage so it makes sense to do it now. When they retire they will have paid it off and it will probably be worth a lot more. They could then sell if they needed to and would have a very comfortable retirement if they downsized and bought a rental. Also, their children will inherit a lot too.

Wish we were on that salary!!!

Yes, six months on full pay and six on half is fine provided your illness concludes within that period. Don't get me wrong, it's far more than most people get, but it still isn't enough that there's no possibility of sickness causing problems. People can and do become too ill to work.

You can't live your life in anticipation of being ill though or nobody would do anything !

Why not really. You can always sell it.

Not necessarily. By the time they have paid stamp duty they will have in the region of 20% equity. Unemployment is more likely at times of general economic distress when house prices could fall a lot more than that. Being leveraged means taking a risk of being forced to sell at the worst possible time, and losing all your equity.

For about ten years, mostly in the 1990's, I lived in London flat that was worth less than the mortgage. If my self-employed income had vanished I could presumably have lost my home and been made bankrupt. My income vanishing was a real risk, it did fall by 40% in the early 90's before gradually climbing again. (Though I believe the lender might, instead of making me bankrupt, just have waited several years until I could repay the negative equity on a home they forced me to sell at the very bottom of a property market downturn. So not being bankrupt would have been worse.)

Of course you can pissssedoff, or in anticipation of fanshithitting generally. And that's what people do when they're very conservative with their borrowing, choose low multiples, properties they could pay off on one income etc. It's no more or lessvalid a way of thinking than stretching yourselves to buy the forever house. Different strokes.

So many variables here. Personally I wouldn't want a large mortgage over my head right up until retirement age but maybe this is the first they weren't able to afford their dream home until now. The mortgage sounds the norm so I don't really see a problem here. Assuming there is equity in the property they will always have the option of selling and not be left destitute if either one of them loses their job. I would say they are in the same position as many others across the country. Nothing unique here.

I presumed the 120 equity was part of the sale price of the old house 250 rather than another 120 on top.
I think it sounds a lot.. I am a bit older but am looking to finish with our two mortgages in the next two years.

Firstly I would stay that it's foolish to assume that you have the full details of your sister's financial situation.

Secondly the various comments about 'status' houses on this thread are pretty rude.

The amounts are different but my brother could have written a similar post to yours when we moved house last year. Except he's completely wrong about what we earn and has no idea what we have in the bank or what investments. I know you say you have a full picture of your sister's affairs but so would my brother. And he's really wrong.

We have a large house yes. We have several good reasons for choosing it (that we didn't discuss with the family) and certainly didn't buy it as a status symbol.

Given that your sister and her DH have fairly good salaries I'm pretty sure they can work a spreadsheet.

Give them some credit - clearly the bank did.

If I was there advisor I'd be telling them that they should have income protection on a sliding scale for benefit (top up when getting half pay and full benefit when that ends).

Redundancy cover. Life cover and family income benefit critical illness cover.

1 in 2 people now get cancer. Average age for a man to have a heart attack? Mid 50's.

Average time off of work with back injury or stress? 13 months.

Big risk for anyone.

The average age for a first heart attack in the US is 66 for men, so I really hope that it's not "mid 50s" in the UK.

And even if it were mid 50s, that's only the average for people who do have a heart attack.

If the average age to get a nose piercing is 19 - would that mean that everyone who is 19 is at risk of getting a nose piercing? No, because the average is only made up of people who do do it, most people just don't do it.

It sounds a lot to me.

But our mortgage is 90k and we earn a combined income of 40k so I guess it's proportional.

Average time off of work with back injury or stress? 13 months

Again, this is probably for people who suffer those conditions. It would also be necessary to look at the percentage of people affected and consider the risk. If the OPs sister etc have not suffered stress at work up to now and are happy with their lot they could probably reasonably assume that their personal risk is low.

I assume financialwizard is a financial adviser of some sort. I said previously upthread that I would expect income protection and critical illness cover at this level to be extremely expensive - hundreds of pounds a month? Maybe financialwizard could give a ballpark figure?

We have never really had any kinds of insurance of this type, apart from when we got our first mortgage and we were young and naïve and took out some sort of insurance only to find that it was so riddled with exclusions it wasn’t worth the paper it was written on and when DP was made redundant a few weeks later it wouldn’t pay anything out so we basically haven’t had any of these financial type insurances since apart from about a tenner a month for very basic life insurance. And all the missellling scandals over PPI etc suggest that this is probably the right approach.

Mine and my husbands life insurance is £60 a month to cover a 60% mortgage of 230k. We're 28 and 30 and it's a 20 year mortgage.