to mortgage ourselves over our heads?

[NCFC4now]

DH will read this so I suppose your opinions will help settle a debate.

DH is 32 and I am 27. We currently own a 3 bed semi Victorian house, it is in a desirable area we love, in the 18 months since we’ve moved in the value increased £75k (bank mortgage valuation) because of the housing bubble.

We over pay our mortgage every month and have a growing amount of equity (especially with the increase!)
However, whilst I love our house, it doesn’t have parking and I find the garden just a bit sad (neighbour has huge trees that block out a lot of sun because the garden isn’t big). Due to the area, parking is difficult and you tend to have to park down the road from your own house.

Because of our location, which we won’t compromise on, a 4 bed with parking, nothing fancy will be £1m. We can get a mortgage for £800k. In my mind, we should wait 2 years (fixed rate ends) and save as much as possible and go for it.

Using present rates available to us, our mortgage minimum payment would be £2.7k a month over 30 years. We can afford this but would mean we can’t really do a step wrong. It would also mean our savings are wiped out due to SDLT so would need to replenish those.

I grew up in poverty and we have achieved everything without any help so I suppose a big house has always been a symbol of achievement to me.

Is it a dumb idea? Tell me your thoughts! I am a bit scared about losing our jobs and whilst DH is a teacher so safe, his extra income comes through a business he runs which I think is stable but you never know. I also hate working and have some mental health issues. Also this could be made worse financially if we do have kids as planned in a couple of years…

DH wants the house but doesn’t want the debt and thinks we should stay put. My argument is simply that having a child and no parking space will cause a breakdown at some point if I’m already stressed whilst fit and childless about the situation.
Thanks

We live in south east. Full time nursery we pay £1600-1700 for each DC. Competitive rates for the area and not the most expensive nursery.

DC2 has just become eligible for 30 hours and the full time fees have reduced to £1100 - we are also paying approx £400 per month wraparound for DC1 but at £1500 total this will be by far the lowest we've paid in 5 years. Before DC1 started school we were paying £2800 per month for two sets of nursery fees.

If either of your taxable income hits £100k then not eligible for the free hours or tax free childcare (which is worth £2k per year per child)

Basically childcare is expensive and for us, more than our mortgage.

What happens to anyone who has a mortgage & loses an income?

I would certainly feel more secure with a 34% mortgage on 8k then a 20% mortgage on 2k

@1forAll74

Why would you have children, if you go and put them in a nursery, or ask family to have them.

🤦 because even mama have to work nowdays ya know

We did this, when we earned a similar income to you. I’m not going to lie, the first three years were tough with no treats or holidays. Gradually we earned more through promotions and refinanced the mortgage on a better deal. We then sold the house after 5 years making 300k profit (wondering if you’re in a similar area to us where things just keep going up and up). We got our kids into the best primary and moved slightly further out and reduced our mortgage. It got us where we are today and so I would advise it but be prepared it is tough!

Why would you have children, if you go and put them in a nursery, or ask family to have them.

🤔

@1forAll74

Why would you have children, if you go and put them in a nursery, or ask family to have them.

WTF

OP realised that an increase to 3% interest (with inflation on other goods) is going to be very difficult to manage.

Sadly I don’t know what’s going to happen to interest, properly prices, or inflation, but with the economy as is, more properties coming into the market, hugely overheated property market... I truly think interest rates will exceed 3% by end of winter.

Why is parking on the street such an issue? We live in an inner London borough where everyone has to park on the street and it's really not a problem. Sometimes we have to park round the corner but it really doesn't bother us.

If £2.7k is 34% of your earnings then how can you get a mortgage for £800k? You’d need to be earning about £160k between you to get that much which you clearly don’t.

@1forAll74

Why would you have children, if you go and put them in a nursery, or ask family to have them.

Yes, agreed. Children are born as cute babies and then disappear en masse at age 5, so why bother? If they grew into young adults and then actual adults you want to spend time with, maybe giving you grandchildren, then I'd understand the appeal.

The country needs to pay back its borrowing as Boris joked today, this means you will pay mind in tax, interest rates are super low, they may rise, property prices are booming, do you really want to borrow more.
You talk of you both having children and working less but paying out more.

Is it really worth it?

If £2.7k is 34% of your earnings then how can you get a mortgage for £800k? You’d need to be earning about £160k between you to get that much which you clearly don’t.

why do you say that?

because8 even mama have to work nowdays ya know
Except in OPs case she could give up work and move into her dream house, mortgage free, if she wanted, if she moved up North and her DH could teach anywhere . Could even find somewhere with nice little shops.

Hi OP, from what you have said I would stay put and save for paying off the mortgage and things you like, like holidays, especially if your income is going to go up. Pay off as much of the mortgage as you can before you decide what your next step is. Your priorities might change in a few years and you might not want to stay in the same area so take that into consideration too!

Also, really key thing to bear in mind before you have kids is go on as many child free holidays as you can! You don’t need a bigger house right now so spend some of your savings on lots of nice holidays and having a jolly good time. A bigger house can wait!

I grew up in poverty but unlike you op I never have felt the need for the big/nice house with roses round the garden or anything. I am happy to have enough food and clothes and owe no one.
No way would I be happy with such debit . I prefer to live owing no one anything. The freedom of that is enough. Yes I will have basic bills but that is enough.

A parking lot is not worth it to me, but clearly it is to you.

We are a decade or so ahead of you, OP.

We have stuck with the house we could comfortably afford rather than trading up and now have enough equity and savings that we could easily move out of London/SE, be mortgage free and live off savings comfortably for a good few years.

We’ve made it through the expensive childcare years while still affording a comfortable lifestyle.

We’ve had some health scares, DH has had a really stressful time at work and not worrying about paying the mortgage through all this has been invaluable. We know if we wanted to we could pay off the mortgage or quit the rat race.

Honestly, do not mortgage yourelf that much.

When we bought our house, we were botj working, both on the same salary. We planned a mortgage that could be covered with one wage 'just in case' Just in case, one of us eneded up redundant etc...

As it happens, I was made redundant whilst on ML (yep...) and then developped a chronic illness so can't work full time. Never wll be able to again.
We have been lucky that dh hasn't been made redundant in his current (but before that he had been - twice before).

You have no idea whta life will throw at you. Illness, redundancies, one of the children having some SEN. the list is endless.

You'd do much better staying where you are and saving/investing/paying current mortgage with all the money you would put in the bigger house.

This is a risk I would never take, especially if you're currently in a place where you aren't saving despite having an income as high as you do. If you're going to take this risk then you need to become a lot more financially diligent in the first place so you don't end up totally fucked.

Said kindly, I think you’re being unreasonable to get yourself in that much debt if the main attraction is parking. We keep a buggy in the car just in case we can’t park close enough for toddler to walk home and just get on with it. Shopping is delivered. It’s fine.

I'm also a bit confused on the maths to be honest, but then in terms of salary multiples I don't know what the £8k is gross when split out into 2 salaries and a side business income, plus OP's bonus, plus her TV work.

This country is hardly a picture of stability.

Your cons for your current house are:

1. shady garden
2. no parking
3. not prestigious enough

I would stay put, save yourself the horrendous stress of being financially stressed with dependants and spend some money on these solutions instead:

1. get a garden designer so you can have a shady garden you love
2. a buggy that fits into the boot of the car
3. some therapy or a really expensive handbag

Children are expensive, life is stressful, holidays are great…

I wouldnt having been through negative equity at one point, and the housing crashes. In the 1980s we bought a maisonette, nothing fancy, mortgage rate was 12% 18 months later its 16%, I ended up with 4 jobs. We had 2 mortgages (2nd DH) he lost his job a month after completion, then was made redundant 5 times in 8 years. We ended up moving to a cheaper area. There was no holidays,no takeaways, one old car that we shared. I went back to working nights, so as not to have to pay childcare.

I think you'd be v irresponsible to do this at this time.

Financially Brexit effects are only just starting to come through, ditto the ramifications from the pandemic.

Not to mention all other potential rising costs (interest rates, energy bills etc) and you'd have higher council tax to pay too

I tend to be risk averse anyway and think it's better to allow yourself some leeway in case of things changing (as they often do in life) rather than over extend yourself and cause yourself stress from that let alone if anything happens in life to negatively impact income (redundancy, illness, disability, divorce/separation, having a child with an illness or disability meaning at least one of you has to go part time or sah)

Always better to hedge your bets and maybe even have some savings for a rainy day.

The "issues" you have with your current house are fairly minor!

We can afford this but would mean we can’t really do a step wrong

That's a stressful position to be in

whilst DH is a teacher so safe

The profession may be fairly secure but you never know what's down the road for him personally

I think that kids and a massive mortgage will be more stressful than a lack of parking.

Totally agree

My mum is a baby person so would definitely help

I would caution against making assumptions there too. She may not want to and/or she may not be able to depending on age and fitness. My mum helped my sister a LOT with her eldest and sister ASSUMED the same would be true for subsequent children but then mum got cancer and her health deteriorated in other ways as she of course was older (in her late 60's by this point) and she simply wasn't up to it! Sister took several strops over this!

I'm prob closer in age to your mum at 49 and with my health/energy levels (I'm disabled and have my own mh issues) I wouldn't be able to commit to childcare.

Do you even have a budget that you work to just now? I've always had a budget spreadsheet since ex and I married and we joined our incomes partly as he's a bit of a nightmare financially!

But I always plan 6 months in advance and like to see how things should be if I stick to the budget, what I do is then copy and paste this to a 2nd sheet and on that sheet record actual expenditure so I can compare and see how I'm doing.

Works for me and I'm on a MUCH lower Income than you as I can't work and am on benefits.

My advice based on all you're saying about how you behave money wise at the moment would be to create a 6 month budget prediction spreadsheet and see if you can actually stick to it! You could even set aside the amount you'd be paying for the dream house mortgage in a savings account, see if you can live on what you have left. Even then that's just a glimpse of what it'd be like

@imnotdefensiveyouare yes it's 2021 but women are STILL paid less, discriminated against at work (especially in relation to maternity issues), still bear the brunt of childcare responsibility (especially when kids are off sick etc) and so on...

Things still aren't great/as they should be

I think it’s a case of the grass being greener. You bought a property and only 18 months later isn’t what you want. What’s to say the next one won’t have some problem you can’t live with.

I stretched myself to move to this house but we didn’t have very many choices for various reasons. I had many, many sleepless nights over it. Luckily it paid off but if anything had gone even slightly wrong for a couple of years we’d have been in real trouble. I wouldn’t ever do it again unless I was really stuck. I certainly wouldn’t do it because parking was bugging me.

I’m surprised at people’s desire to overstretch on the home they own. This maxing massively restricts your freedom to make different choices about lifestyle like pausing work for a while. It also leaves you extremely vulnerable if a job gets lost or you lose one income. If you go on maternity, presumably this 3k becomes around 50 or more % of household income. Plus at two days a week with two kids, childcare will increase your cost of living by 1200 per month. Just figured that bear considering. Also, always stress test for a 5% mortgage as rare are currently at a record low. If it’s affordable now, would it still be so when rates go up?