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!

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

This has what has put us off moving house tbh.

We can stay put and be mortgage free at the age of 55, or we could have moved and would be paying the mortgage, with no chance of taking early retirement, until we were 67.

We just couldn't face that thought.

The ratios look totally fine but I would consider also

1. increased stamp duty, council tax, utilities on a larger/more expensive property
2. what cash savings do you have in the event of an unexpected expense eg accident, car breakdown? How would that impact your ability to repay?
3. what is your employment status - redundancy terms?
4. what happens if one of you dies? You mentioned redundancy and CI cover, but do you have any life cover or death in service benefit?

None of the above is a deal-breaker but you should seriously consider and discuss with your OH.

Good luck!

The thing is, if not now then when? If you ever want to have your dream home, the sooner you go for it and start paying for it, the better. We were in a similar situation but we're coming out of the other end now due to pay rises etc and have actually started making overpayments. You have to balance your housing objectives (for want of a better word) with your age/income/how quickly you want things to be paid off. My plan is to have the mortgage paid off in 5 years, if we hadn't moved when we did that would have taken me much further into my 50s than I want.

Wow people have so much disposable income! Our mortgage is about 40% of earnings. It felt like the only way to get the house we wanted.

Please consider the effect an interest rate rise would have (if you choose a variable rate type mortgage). I know we haven't had a serious interest rate rise for some years, but it will happen sometime and it will take people unawares as they won't be used to it . We don't know what the full effect of Brexit on the economy will be yet.

What is the dream home and dream location offering you that you don’t have now? I’d start there and work out whether what you gain is worth how you feel about the money side.
1400 a month also doesn’t give us the full picture. We don’t know your LTV and how much equity you’re likely to have. You could be dicing with negative equity (if there was a dip) or miles away, you may have a really low interest rate or a so so one. If you’re potentially getting a fantastic rate, what happens if you lose that rate and have to pay even 1% more? That’s all the stuff to think about. How much more are the bills? Can you over pay?
Only you can know whether you’ll forever be worrying or whether it’s likely to be a short lived wobble. If it only comes down to income and you have contingency plans in place, then getting a chance at the dream is amazing and I’d probably go for it.

I don't mean to be negative but what if interest rates go up a lot? The repayments may be more. Even on a fixed rate rates may be higher when your fixed rate runs out. Could you afford it if interest rates were 15% or so, like in the early ninetie

Ok, I think I'm suitably freaked out now!

Yes, I do worry a lot about interest rates!

To answer a few questions, we would be borrowing 67% of the house's value. We are both civil servants so pensions, death in service benefits, sick leave all in place.

We won't be having any more children so no more mat leaves to think about. We could hopefully overpay as childcare costs go down. Or remortgage over fewer years at that point maybe.

I personally wouldn't do it, life is for living. remember the saying 'here for a good time not a long time' it's financial suicide just for bricks and mortar. its not worth the stress and worry. I prefer to make memories with holidays and live comfortably with my family. after all you can't take your house with you when your gone.

That doesn’t sound worrying at all to me, you’ll have loads left over! Even after bills/council tax/childcare/travel etc it looks like you’ll still have at least 2k disposable income. That’s a lot in my book. I’m looking into buying solo and any mortgage under 50% of my income sounds like a bargain to me.

Yes, I do worry a lot about interest rates!

Then get a long term fixed rate! A 10 year fix should be around 2.5%,

On paper it's fine but check the actual take home pay (after tax and pensions etc) the council tax on the new place etc

Sounds fine to me. Our mortgage is £1500 a month and we earn £5.8k but we also have a £500 a month loan and we are fine financially.

I think the numbers work out reasonably OK for now but check what the repayments will be of interest rates have gone up massively by the time your initial fixed rate comes to an end. You do need a little slack to absorb that. Also it would be a good idea to earmark 3-6 months of mortgage payments in a saving account you never touch, which is there only just in case of one of your worst-case scenarios - the amount needs to be enough to give you the space to work out a new plan if things go wrong.

Well I took an extra 500 for your bill per month. Ours are around 700 including a 300 car payment but not including our mortgage. It leaves you with about 600 a week to live on, for shopping, travel to work, clubs etc. Will that be enough? Remember your council tax will very likely increase with a larger property.

We pay similar with a smaller income. We wanted to move to a better area and suck it up. It’s not just mortgage though, there are all the other costs on top. We have no holidays but don’t go short as such.

Make sure you cost it properly if you do. The true price of the house is going to include estate agents' fees, stamp duty, solicitors' fees, moving costs, possibly the cost of redeeming your mortgage early, any IFA fees that you incur if you use one to look for mortgage deals for you, cost of survey and any work that needs to be done on the house after you move into it. And then you also have to factor in travel costs, childcare costs etc as a result of moving (could go up or down of course). But the true cost of moving is probably going to be quite a bit more than the price of the house.

It sounds petrifying to me but our mortgage is £325.

Why are you freaking out? Yes of course there are people with miniscule mortgages but it's not normal (despite the impression Mumsnet gives off). £1400 is a small amount to spend to house a whole family when there are single people and couples spending more with less income (even factoring in childcare).

We live in quite a modest home compared to what we could have moved to. Two of our friends and us all looked to move at about the same age as you. This is a decade ago. They both have wow factor homes. One ended up with no hols for five years the other had to increase her hours. Obviously they have no childcare now but teens seem to cost a lot even if not spoilt with designer clothes etc.

I also ended up chronically ill, I’m like yourself though and was in a defined benefits scheme so still have an income but it’s not as much as before. The house we wanted had a dreadful survey and I’m quite glad now.

I’m assuming your dc are quite small, believe me they become more vocal in what they want and don’t want to do. Funnily enough DS would happily camp as will DH I have said they are welcome to go off together. No way would I choose a mortgage term that ran till I was at retirement age if I didn’t need to. I know some people do not have a choice in these matters.

Over the next six years your salaries will go up and your childcare down. Your equity will grow and mortgage debt reduce.

Is that really definite though given we have no idea what is going to happen with Brexit?

We have similar financial situation to yourselves but my husbands job is probably less stable (small firm, private sector).

We have savings to cover loss of job for him (6 months worth of salary for him)

We took a 10 year mortgage out at 2.5% for the security. I am off on maternity and have 2 kids under 3 so our childcare costs are going to be more than our mortgage for the next few years but we are hoping to make overpayments once younger one gets the 30 free hours.

I think with all the political uncertainty at the moment everyone is looking at how to cope on one salary. The good times seem less sure now

I wouldn't personally. I feel safer having a smaller house and lower mortgage. I am 45 and wouldn't want to take on a new, big debt now. I would be concerned about interest rates, which you can only really fix for a few years and the rising cost of living. Council tax is very high and keeps going up. If you can only manage this easily if everything else stays the same, then imo you are stretching yourself too much.
I like the idea of paying off my mortgage (it's easier to overpay if you are not already paying a lot) and then having less pressure to have a high level of income.

Another thing is that you will likely have to finance your kids through university. I know it seems like a long way off when the DC are little, but it comes around quick!

I would think about your jobs - if you’re doctors, nurses, teachers, any job that is experiencing some kind of shortage, I wouldn’t worry too much as if redundancy happens, you will find work. Critical incident insurance would help with illness up to about a year - would give you time to sell if Illness was permanent. Life insurance would cover either of you dying. If either of you is niche from a job point of view - my friend, for example, is in ‘space science’ and there are really only a few places in the UK that would employ him - then you perhaps have a point but everything else can probably be covered.