AIBU to worry we've overstretched?

[crimson72]

DH and I moved to a new place last year on a five year fixed term. The total mortgage term is 25 years (24 now remaining) and the total amount borrowed is about £330k! The LTV is 70% and our monthly repayments are about £1400. By the time our five-year term comes to an end in 2022 we'll be down to £280K remaining.

Our joint income is £60K a year approx, down from around £85K when we bought the property (DH has since gone self-employed and set up a business).

I thought £1400 p/m didn't seem too bad as I have friends who pay that amount or more in rent (I live in London). However, I've been reading the debt thread currently in AIBU and almost everyone else seems to have much lower mortgages than I do.

Would you be worried in my situation?

Compacting London mortgages to non-London mortgages is always going to show a massive difference so I wouldn’t worry if I was you! I rent in London and our flat is definitely more than £1400 pm.

Thanks Milien - that is true. I think by the time we reach the end of our five year term we'll be in the 60% LTV bracket, so that should help somewhat.

Your repayments sound reasonable for where you live. We're older, and I'm glad we stretched ourselves with our mortgage when we were younger as it made it possible for us to downsize and pay off the mortgage in our early/mid 50's.

I think that is high given your income but its a long mortgage so I'd approach it by overpaying.

We've just cleared our (larger) mortgage in ten years by overpaying.

there's no way you'd be able to overpay on that salary. Do you have kids? Or you going to? Our income is similar and we pay 1000 a month. But we pay 600 in childcare as well.

I wouldn't worry too much as long as you are able to pay without struggling. I live in the south east and we are just under £1400 a month (mortgage).

Paying £500 a month rent or mortgage seems to be for those living in much cheaper parts of the country, or who bought 15/16 years ago years ago

No.
You’ve got a decent slice of equity and you don’t mention that you are struggling to meet the repayments.

Are you able to pay now and live comfortably with some money spare, no other debt and starting to build and small savings pot for emergencies. Things will cost more in the next few years so your other out goings will go up.

Like a previous poster said having children or just one child can be a massive strain on anyone’s budget and will have a big impact.

It's a high mortgage for your current income, more than 5x, but if you're managing the repayments I wouldn't worry about it. Dh and I borrowed 5x our joint income and I'm now a sahm so our income has dropped but buying a house is a long term process and will be worth it in the end. Instead of looking at it as £1400 a month outgoing, think of it as £700 increase in your equity in the property, so it's not lost money

We’ve now got a £1400 a month mortgage compared to our previous £600. But our house is now double the size. I try not to think about it but we have kids and they needed the space.

London to non- London is a false comparison- we paid £1200 in rent on much lower combined salary for years, plus childcare, and we managed. As long as it’s affordable and you have insurance for job loss/critical illness etc it’s fine. I’d be a bit concerned about the self-employed income but presumably if it went wrong your DH could go back into employment so there’s always options.

I don't really get why comparing London to non London isn't valid. Income to debt ratio is still the same isn't it? It's just the numbers are higher!

There is a faster way to pay down the mortgage than making extra payments without paying more except in the first month. If your payment is due on the 10th of the month in month one pay your mortgage amount, then on the 20th pay 1/2 of the amount due for month 2 payment then on day due pay the other 1/2. Doing this every month from the start keeps payments the same but cuts the interest payments due by the end of the mortgage by a LOT! (run individual analysis but should save about 25-30% of total interest due depending on term of the mortgage).

I agree with PP, as long as you can meet the payments and have enough left over for bills etc you should be ok.

i would be terrified to have a mortgage that size on the income you have but if you can manage it and have a lovely house which will gain value, then fair enough.
My mortgage is £300 a month but then I live in a shitty flat which is falling down so not in any better position.

Could you rent your house for £1400? It probably would be around that, if in London. If you were renting you would have nothing to ahpw for it.

I know many people have no option but to rent, before I get leapt on!

I am another person who is very glad we stretched ourselves to buy in our 30's. We now have many more options as older people.

One thing I now wish we had done is overpay regularly

You borrowed 330k, I would expect a higher mortgage.

I borrowed 170k my mortgage repayments are a lot lower than yours (not in London).

Don't compare yourself to others. If you're ticking along nicely and able to make the payments then don't worry

That sounds like a huge mortgage! I wouldn't have stretched myself that far personally and would have just rented but then we rent out flat for £500 pcm.

When I had a mortgage my repayments were £400 a month.

I think it depends on your other outgoings. We have a similar income but decided against buying a house because we would be tying ourselves into £1.5k everymontj for the type of house that we could rent for closer to 1k. But we have children and live in an area where large houses are over valued.

Honestly that side mortgage would scare the s**t out of me and our household income is £110k

I would be worried about how you would manage if the interest rates increase. On a mortgage that size a small raise in interest could significantly increase your monthly payments. We have the same income and our mortgage is half yours and I still panic over what could happen after Brexit. Sorry.

Your mortgage term is quite short at 25 years. Everyone I know seems to have gone for 30-35 years to keep payments more affordable. This does mean more interest in the long term though. You’re paying quite a hefty chunk of capital off during your 5 years. If you can hang on for the next few years you should be in a good position when you come to remortgage.

Thanks for the replies. Our take-home pay is almost £2K per month each, of which £700 each goes on the mortgage. After food and bills we're left with around £850 each per month "disposable" income (we don't have DC or any debts, other than the massive mortgage!)

So it seems quite manageable at the moment and we don't feel like we're struggling - although I am still trying to economise by spending less on takeaways and things like that. It would be nice to have some spare cash at the end of the month to put aside for holidays emergencies.

When we were buying, we wanted two bedrooms and a garden and it seemed practically impossible to get anything half-decent for much cheaper than what we paid - and we're not in an especially "naice" area of London either. We intend to stay here for at least 10 years, maybe more.

Obviously if interest rates have gone up significantly by the time we come to renew though, that could be a problem.

NationalShite - do you live in London? I think it's impossible not to have a mortgage of around that size where I am sadly, unless you have owned for a while or have a sizeable pot of money to put into the property (neither of which apply to us).

User - our LTV will have dropped to 60% by the time we come to remortgage, so I'm hoping that will help a bit (although I'm not sure by how much...)

Can I suggest you both put an extra £150 to the mortgage and reduce your disposable to £700 per month?

It will make a huge difference to you and if you treat the overpayment as another bill you’ll get used to it.

As soon as you have DC, if that’s in your future, you’ll look back at this time and wish you’d saved whilst you could, even if it doesn’t seem like it now!