AIBU in thinking this mortgage repayment will be too much?

[BebeBelge]

Hello!

Looking for some advice ...We are hoping to move to a bigger house. DH proposes we take on a mortgage with repayments of £1400 per month.

I am just about to start a full time job which will mean our combined take home pay will be £5000 per month.

For reference our current mortgage is £730 per month and we just have DH's salary of £3400 per month. We have 3 primary aged children in full-time after school club costing £700 per month, we run one car, kids do the usual activities (swimming, rugby, beavers etc), we live very comfortably but not lavishly.

My worry is that one of us loses our job or gets ill etc. and the mortgage is unsustainable on one wage. DH says you can't live on what ifs. The house in question would be our dream home in the dream location.

AIBU?

I know this is a first world problem, I really do! I don't want this to turn in to a discussion about how lucky we are to be in this position because I know we are. But I am generally terrified of money issues and am feeling very anxious about this decision.

Thank you!

Where did all my paragraphs go?!? Sorry!

It's understandable to feel stressed, I would too. Could you maybe get insurance against that happening? How secure are your jobs?

Could you take it over a longer term to reduce the payments with an option to overpay if you have capacity?

Your current mortgage is 21.5% of your net income. Your new mortgage is 28% of your net income. If you can also afford the increase in council tax and utilities then I'd do it, but it sounds like you need to crunch the numbers before you are convinced.

I don't think that mortgage payment sounds anywhere near too much. You'd still have the best part of 3k left after mortgage and childcare are paid for - which is far more than the average household income!

To me that sounds quite tight but it completely depends how much you spend each month.
Our mortgage is £1500pm and our household income is around £130k. So about £6k per month after tax/NI and childcare vouchers come out meaning our mortgage is 25% of our outgoings.

Our take home is a bit more than yours (but not by miles) and our new mortgage will be £1200 and like you it makes me a tiny bit nervous (by coincidence our current one is £741!)

I only took it on because if I lost my job we could still live off his wage, though would be beans on toast and a different life. If he lost his, we could make up the difference by him getting a job half the wage and/or taking in a lodger. We also have a 6 month emergency fund saved which could float us or - worse comes to worst - allow us to sell up without going bankrupt!

I don't think it sounds crazy if you can float yourselves should something go wrong, at least long enough to figure out an alternative. I know lots of %ages are bandied about but I don't think it works that way if you don't always inflate the rest of your lifestyle to match your wage. For instance, we are happy having one older smaller car when a lot of our peers on similar wages have BMWs on PCP.

YANBU to worry but, if you are sensible about it, you wouldn't be crazy to do it.

We have income protection insurance for redundancy/critical illness.

Those repayments are based on 25 years and we are 42 and 43yrs old.

I regretted doing this. It means you always have to earn x amount of money per month. No going part time always staying full time (unless big pay rises expected). I found it put us under huge strain and I resented it.

Oh sorry I read it wrongly, I thought you'd said £50k per year household income. £5k a month is fine. Ignore the above!

My concern is you have not started the new job yet to see how it goes- would it not be better to be established in that first before taking it on

Sounds pretty good to me!!

If one of you lost your job, you wouldn't need after school club so that would be £700 pm 'saved'. I think it sounds OK at 28%, personally.

Thanks everyone! We don't spend a lot I don't think and manage to save a bit just now. We rarely eat out, and do relatively cheap weekend away camping

The job is something I have been training for and there are plenty of jobs available. But yes, as boredbored said, I worry we will always feel the pressure each month and, yes, no part-time options. Although both of us can expect pay rises steadily over the next 6 years and by then we won't need childcare anymore.

I think I was expecting everyone to agree with me that it's too much of our income to spend on mortgage but interestingly not!

So the mortgage increase will be half of your salary? I would go for it and treat it like savings for now.

You'll be okay and then really okay when you're no longer paying for childcare.

It sounds fine to me - I would just take out income protection insurance

That wouldn't worry me at all, though I'd look into insurance for illness etc.

Very similar here and mange fine - bit we don’t have the childcare costs anymore.

It would be too high for my personal liking on that salary, but if job loss/illness are the only issues putting you off then I’d look into mortgage protection & critical illness/incident cover.

I’m an obsessively risk averse person though (we like to keep our mortgage payment to less than 10% of our take-home).

Would you both have to work full time until you are nearly 70 to pay for it thoug ? Or will you be able to pay it off early ? Personally I would not want a big mortgage round my neck at that stage of my life.

Yes Id do it!

Why are the children in after school club if it was just your dh working? Or do you mean they will be there once you start work?

Problem is OP is that everyone is different & some people would stress about it & other wouldnt. As a financial advisor & mortgage broker I'd say the figures are not extreme & certainly doable by most people thesedays.

Only word of warning is have you had a mortgage agreed in principle. ? Some lenders will want you to have been in your current employment for 6 months befirecsgreeing a new mortgage. Have you checked with them their criteria...?