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

I only over-extended myself with debt once, and it took 5 years to correct. The mental stress from the debt was too much. It was an important life lesson and I wouldn’t do it again.

So my advice is stay where you are, and reconsider your position in 2 years.

@2bazookas I agree I think we're headed into seriously dodgy times economy wise in this country. Tories have really fucked up there and we're only seeing the v beginnings of what that means for the public

Our mortgage is 21% of our joint net take home, it’s about 13% gross. We’ve only ever taken my husbands salary into consideration when buying houses, obviously not everyone is in a position to do this and know we’re very fortunate, it allowed me to take full 12 months maternity for all of our children and whilst I did go back, Hubby said I didn’t have to work, which made going back to work a lot easier as it was a choice, there was no pressure.

With increased equity and a maxed mortgage we could nearly double what we paid for this but half my salary goes on childcare at the moment. We would completely sink if we maxed out. Spent years being skint climbing the ladder and renovating properties, we are in a good position now because we bought young but children are still expensive and it didn’t happen without sacrifices. In my very humble opinion there is no point having a £1m house if you can’t enjoy it because you’re both out working all hours to pay for it. Your doing the right thing by overpaying and weighing things up and you might find it’s doable. Just be mindful the property market could be completely different in a couple of years, you don’t want make any rash decisions to tuck yourself up with a big mortgage, especially if prices go south or interest rates go up. Like others have said factor in a hefty contingency for child care and inflation. Your current home sounds lovely and full of character.

I agree re: the current economic outlook. All the signs point towards the next few years being very difficult indeed.

Never borrow more than 4 times joint income.

Then test:

• can you pay the mortgage payment off one of your salaries? How much money is left over?
• work out your monthly income after tax. Now take out at least £1,000 for childcare and baby costs. Remember your utility bills are higher in a bigger house. Can you still afford it?

We have just had exactly this debate. Something ‘meh’ in this area is still £1mn.

We have gone for the huge mortgage (£700k in our case) to buy a renovation project at £1.1mn. The mortgage is about 25% of our take home income which isn’t bad, but we have two in expensive childcare which makes it tight for a few years.

We are really happy that we did it. However we are in a position where childcare costs will reduce soon, we both expect promotions and we still have something in savings should the shit hit the fan. I’ll admit that I do feel uncomfortable knowing that at the moment we couldn’t pay the mortgage if something went wrong.

Gosh you are so young and your earnings will go up. Do it

@Flup

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.

No one should move up north. We have no nice shops. No culture here. Horrible place. Whole north. Everyone should stay south. so our prices don't go even more crazy and we can still have mortgages 10% of our incomes still

@nellyburt

I think that kids and a massive mortgage will be more stressful than a lack of parking. Keep overpaying and see where you are in two years and factor in £1k a month for nursery.

Agree with this. You'd be setting yourself up for a much more stressful life OP.

You’ve got a nice house in a nice area. A 3 bed semi is more than enough space for a couple and two youngish kids. I am speaking from my own experience here. Only now the kids are 6 and 8 are we looking at moving.

I would totally stay put for now and save and overpay your mortgage as much as you can. It will likely increase further in value. The non parking issue is annoying but def not a reason to upgrade your house right now.

Bear in mind when/if you have kids you may not go back to earning what you do now. I ended up quitting my job and going self employed instead. Right decision but financially it has meant a lot less money coming in from my side.

My 2 cents is.. if you live you will be the breadwinner and can never cut your hours. I would rather be in a smaller house and have the option of being a SAHM if I wanted. It sounds like you can afford it ok but my reservation would be tying yourself into a crazy busy City role and never being able to step back. Can you not get a 3 bed with better parking? How much did you pay for your current house?

FWIW I had 2 non walking babies with a car a lift journey, through the complex, out the back across the road, down a side road and sometimes down another side road. It was a pita but was doable. Parking on the same road sounds so easy!

I'd be so worried that with such an expensive house and so much borrowed, that a property price drop ( likely and certainly unpredictable given current BREXIT/COVID times) will be catastrophic and you will lose your hard earned money. The gap between equity and the cost of house puts you at risk.

Wait a while.

@NCFC4now

I obviously don’t understand the free childcare hours by a few comments here. My understanding was they get 30 free hours if you earn at least x amount and below NET £100k. We earn below £100k on net income.

Not until they’re 3!

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.

This. And for the love of all that's holy get onto the website of the three nearest nurseries and work out what 3(?) full days' care will cost from age 1-3 / six months to 3 / whatever you think is likely in your circs.

In your shoes - and it sounds flippant, I'm sorry - I'd stay put, enjoy yourselves, hire a garden designer, revel in your disposable income for a bit and when the time comes buy a YoYo or Bee to stay in the car.

@Indoctro

So we were in something similar to your position

We were taking home £10000 a month

Oil and gas boom

I wanted a £750,000 house my husband would not entertain the idea (£3000 a month the repayments were at the time)

£340,000 we spent (£1200 repayment)

2 years later the oil crashed and he lost his job

It took him 1 year to find employment

In that time we used £40,000 savings the stress of a £3000 a month mortgage would of been horrid, I'm glad he had more sense than me to take on a huge amount

Instead we have concentrated on paying it off

5 years later we are now mortgage free

I would rather be debt free than up to my eyes. I realise now what a better idea that was.

Do I live on the house of my dreams .?

Absolutely not but we have financially in a great place at 42 years old and I realise now how much more benefit that is than a house.

Thanks so much for this comment. It sounds like a really tough year. Just wanted to say that this comment was really useful for me. We live in London in a small flat, and a modest terrace house in this area is £1m. We can get the mortgage, but again it's at the very top of what we can afford and about 33% of our net salary monthly. We've been deliberating this because I'm pregnant and we need more space. But I think the right thing for us to do is to save more over another couple of years and not stretch ourselves too much. Because job loss could happen to anyone, especially in the climate. So you're right, having something manageable on one salary would really help if this did happen.

To the OP, and all the people saying mat leave, it's worth looking into shared parental leave as policies at many workplaces are changing so both partners can get full pay. It's often in a separate part of the policy to the paternity leave section. So we are getting 11 months off between us at full pay. But yeah nursery is a LOT at £1500 a month here. And over £100k gross salary there's no access to tax free childcare or the 30 hours free etc. So you would be having to fund it all between you OP.

But really interesting to hear everyone's views on here

[quote NCFC4now]@marykitty it sounds so stupid, but how much is childcare and for what? And how long do they need it (I’m assuming the free childcare gov hours eventually kick in) CLUELESS![/quote]
So you're a high earner, but can't work this out?

Nah, get a really good 2 or 3 bed. You don't need 4.

Childcare costs are very high - you're looking at at least a grand a month on those for years.

Agree razzle tizz

I knew a few nannies to very wealthy people and I found it hugely ironic that they were enjoying these huge houses, sometimes pool etc.. And the peoples own dc whilst they were out slogging away for it all.

What is the point!

Personally I wouldn't want such a huge amount of debt but as pp said your so young.
Isn't there a half way house, a middle jump before the big jump?
If you read any fire stuff.. Financial independence retire early it's all about keeping living costs right down, whilst your earning goes up buying you... Freedom.

In the mid eighties my mortgage rate was 16% it went up almost weekly and I can see us veering towards that again so enjoy what you have life is too short

Weird thread. You “aren’t saving anything”, but your DH saves £1.5k a month and you put £1k a month into investments? You can get a mortgage for £800k, but your net salary is only £3.2k a month and your husband is a teacher? You spend loads on meals out and holidays, but you’re also very frugal and only buy secondhand?

Anyway… you’re very misinformed about the 30 “free” nursery hours. They aren’t free at all, only partly funded by the government and only in term time. It’s 22.5hrs a week over 52 weeks. Our full time nursery bill dropped from £1700 to £1000 when we got them. And you don’t get them if one of you earns more than £100k gross, not net.

I think it's a bit too risky. People are saying twins, but what if you had a child with additional needs and one of you had to stay at home to be a carer? Or one of you fell seriously ill? You say you suffer from depression.. What if it came back much worse as pnd and you could not go back to work for a while? I mean these are all hypothetical scenarios, but not too far fetched. Having a baby can bring a lot of previously unthinkable emotions, situations and considerations and the last thing you'd need at that point would be immense financial pressure to go back to work as early as within 6 months from birth.

I understand your desire to have the house you dream of, but sometimes peace of mind is more important than anything else. With your combined income you can enjoy the good things in life and not to become a slave for your mortgage.

Also you really need to think about the possibility of one of you getting ill and not being able to work. Yeah you can get insurance for that but it’s bloody expensive!!

Nope nope nope, imagine if rates go up, you can't pay as you can't remortgage die to high rates.

Remember you also want to enjoy life rather than stretchy

I don't share your faith in fixed rate mortgages lasting much longer..

Look whaty just happened to energy companies. They had a zillion customers on fixed rate deals; fuel cost suddenly shot up; the energy companies were running at a gigantic loss and forced out of business.

Exactly the same thing could happen to fixed rate mortgages. As soon as inflation or interest rates strat to rise, lenders will dump fix-rates as soom as the term finishes, in favour of flexible rate loans; which is exactly what we all had years ago. Back then all lenders announced interest rises in lockstep.

Now, imagine you've got a gigantic mortgage at a runaway interest rate; the economy/ housing market flops and you're in negative equity ( house is worth less than you owe the mortgage company).

@Wazzzzzzzup. It's ok, we're safe up North. No one from down there believes it's possible to live here.