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

Wazzzzzzzup fair enough!

Everyone is saying about the free childcare which is great, but I don't think you can rely on it. Who knows if it will be pulled?! Tories are making cuts everywhere. If they can take £20 off struggling families I am not holding out much hope for this to continue.

*Substantial amounts wasted though is the problem. Someone who is wasting money right now and doesn't even know how much childcare will cost her is not likely to stop spending frivolous amounts on crap. Loads of people do it, they live month to month. Would you agree that she should continue her current lifestyle and get a bigger mortgage and kids? She literally cannot afford it.

If they both stop spending on crap from now, get a proper focus on their finances as it doesn't sound like they have one, and figure stuff out for childcare, then they can look at getting a bigger home. You don't get the bigger home first then do the rest.*

Sort of agree with this. The only thing is though, surely they would prioritise their mortgage and just have to stop all the silly spending? Yes, there are some people who ignore the mortgage and spend on crap, but OP and her DH don't some like they are that sort.

@ballsdeep

Everyone is saying about the free childcare which is great, but I don't think you can rely on it. Who knows if it will be pulled?! Tories are making cuts everywhere. If they can take £20 off struggling families I am not holding out much hope for this to continue.

I think the difference is that those affected by the £20 don't vote Tory. Many using childcare do. Still, this would massively upset my finances and my DC are too young to be eligible.

I absolutely wouldn't do this.
If you plan to have children the last thing you want is to be stressed about money as well as becoming new parents.
The walk might be a pain but arguing with your husband because you're in a tonne of debt would be a lot worse.
Also, childcare is extortionate for the first 4 years.

We had a similar dilemma, although much cheaper area. We have a Victorian terrace with no parking and the layout of the house isn't entirely practical either. We could technically get a bigger mortgage and have parking and more living space.

We stayed put. So glad we did. Yes it's a faff without parking (and we have steps up to the house so a nightmare with the buggy) but I'm so glad we did. Husband suddenly lost job and ended up on minimum wage for a year because he couldn't find a suitable position in his niche for ages, I found it harder than I expected fitting work around DC. Ended up having to use far more paid childcare hours than I expected to make it work. Suddenly, our previously affordable mortgage became a stretch.

I really understand your reasons for wanting to move, but there is no misery like being overstretched on your house. I'd get the nursery phase of DC out of the way and then think about moving once you no longer have the expense of childcare to factor in. We will eventually take the plunge, I imagine when DC is in school

What on earth do you spend your money on? Seriously, you say between you you take home around £8k a month. That's a huge amount.

You say you eat out a lot, but don't spend much on other things. Yet you overspend each month? Are you really spending thousands of pounds a month eating out?

Honestly I don't think the parking thing is massive. With a baby you'd carry the car seat to the front door when they are little or put them in the pram and take the. To the front door. No biggy. Being on debt will be waaaay more stressful. Kids are expensive. My daughter is in nursery 3 days a week at around £700 per month. Son at childminder 2 days at about £450 per month. Replenishing savings might be tricky and I think it's important to have savings when you have a child. Definitely have a good long think about it. Also you might decide you won't to move to a slightly different area once having children, it does change your priorities and perspective on these things which is why it's so common for young families to move out of London and other big cities x

What I dont understand, is how your DH has time to be a teacher, run a business and volunteer at food banks.

You say you take home around 3,200 a month, but you are a high earner in City Finance? thats only around 51k, without any deductions for pension etc, thats not really a high earner, although the 40% bonus is nice

Also - how do you expect to keep this level of earning up if you go part-time?

Yes hats a good point- other threads teachers are talking about working 60-90 hour weeks. What's his side hussle?

I wouldn’t either, not at the moment. If I was in your position (and we have been in the past), I’d wait and see what happens to interest rates and housing market over the next 12-18 months.

And on nursery costs (also in SE), full time for our two DD’s including after school care for 7 years, cost us over £100k.

If you grew up in poverty as you said in your OP, don’t bank on receiving a substantial inheritance.
I think this is way out of your budget and wouldn’t want to ever be in so much debt.

In pure financial terms, investing in a highly leveraged house in the UK is the best investment you can make with your money.

This is due to you benefitting from the appreciation of the whole asset despite only investing in say 20% of it at the outset.

To illustrate in simple terms, you buy a house for £1m but only invest £200k as you have £800,000 mortgage. Say the house increases in value by 10% or £100,000. You have made a 50% return on your investment and turned your £200,000 into £300,000. There are very few ways to match that sort of return.

The likelihood of a house price crash in the UK is very small as market prices for anything are largely informed by supply/demand. We are a small island with not enough housing and that will never change.

For these reasons we have always pushed ourselves to the absolute max in terms of mortgage. That said, we do earn very well and so can absorb temporary economic fluctuations.

@NCFC4now I think it would pure madness to have a mortgage of nearly 3 grand a month to pay! The stress of that plus kids would be a lot worse than having no parking... also, you cannot guarantee a good income once kids come along no matter how hard you try to juggle things... there's just no certainty and the last you thing you want is to go into arrears, more borrowing or being repossessed..,

I wouldn't do it at this stage. If you do have kids, you will be shocked at how expensive they can be overall. It would be miserable if you felt you couldn't treat yourself because of a huge mortgage payment. Life is for living.

We bought our first house when we got married then had DS and a dog. We quickly realised it was too small for us. Moved to a bigger house in a different area for a couple of years then moved again to what is likely to be our forever house in one of the best areas. You don't have to go from 0-100 in one step. I know you feel having an in between house is a waste, but it really isn't. If you have kids it will let you see how your finances, careers etc play out before you potentially make an even bigger move.

Reading all your posts, I think in the end YANBU.

It's about 30% of your current income, and the mortgage would be for 80% of the house cost. That should absorb any value decrease, should you need to sell.
As for parking, it depends on how bad it is in your area. If you can usually park within a couple of houses, it shouldn't be a problem, but if you often have to park on the next street, then I'd go for the house with the drive, certainly.
I did go for the drive, but did compromise on the area. Having said that, perhaps you can find something off area but close enough, or not?

Look up childcare costs in your area.

You will have to compromise on something. It may be on the savings, at least for a few years.
Also consider income growth potential. Are you both likely to increase your salaries so that the mortgage costs would reduce in proportion? Or have you basically reached your peak?

I would always advise having the kids first before moving, and having kids when you are in an affordable situation with no financial stress. You don’t know how you will feel after having children, how much work you will want / be able to do, how you will feel about going back to work etc. Having children is a major life change and you don’t want to be stressing about money at the same time. If, once you’ve had children and you are back working at a level you feel you can manage, then make any house move decisions based on your income and financial situation at that time.

Not a good time to mortgage yourselves to the hilt. Cost of living is increasing plus one or both of you will likely feel totally different about work once you have children. I wouldn't go for any option which did not allow any wriggle room or rethink after having children.

I'd look to buy something bigger in a cheaper area without adding much to your mortgage. Our commute into London from Kent is an hour, but mostly we work from home now, and we have a spacious 4 bed semi-detached house worth £650k minimum with a large garden in a nice area with good schools. Our take home is £8,000 a month and we still need to watch where the money goes.

The likelihood of a house price crash in the UK is very small as market prices for anything are largely informed by supply/demand. We are a small island with not enough housing and that will never change

We were a small island with not enough housing at the beginning of the 90s. As a pp has pointed out, demand in the housing market isn’t just wanting to buy a property, it’s being in the financial position to do so.

If the property market starts to fall, demand will dry up because nobody wants to catch a falling knife. If interest rates rise - and they will - banks will tighten lending criteria just at the point where the market is flooded with property being sold because its owners are in financial difficulties. The only people who benefit in such a market are cash buyers who force prices down further.

I can understand people who have only known boom thinking bust can never happen but it’s inevitable because the economy is cyclical. The thing to do when a storm’s approaching is batten down the hatches.

Why don't you save, HARD, for the next 18 months and then reassess, if you aren't doing anything for 2 years anyway? Decide what you want to prioritise, is it your house or holidays and eating out?

If I had my time again (as now a 46 year old with two older children) what I'd do is financially plan more at your age around having children from the age of 27, as when I had kids at 29, and DD1 came along a bit sooner than we'd imagined, what I'd have liked was to be able to work in a part-time, less demanding job, particularly after DD2 came along as well. We did ok and I did manage to have some time at home with them, but my professional, full on job wasn't feasible with small children.

A house price crash happened not too long ago, at least for those of us who are over 30.

Having children is genuinely way more money than we ever anticipated. We pay £70 per day for nursery in the South West, this excludes all food, nappies, wipes, sun cream etc... We also pay extra for her to have ballet lessons and language lessons at nursery.

This is before any of the other baby classes we take in the week on my days I don’t work, swimming lessons are £15 a week, music class is another £7. We are looking at another £150 a month for all her extras on top of nursery.

There are lots of costs we never anticipated, for example this week I had to buy my one year old wellies, they cost £40 and I doubt they’ll last the winter. Outside nursery so needed to be warm and they were a baby size 3. There is no way I’d mortgage myself to the maximum, children are so expensive and we hadn’t ever budgeted these things. Although I’m sure everyone will say they aren’t essential, we want our daughter to have the best start she can.

No way in hell would I do that. Obviously not wishing this on you but what if your children (should you have them) have additional needs?

DH and I considered what you are considering but decided against it as we didn't want that worry and pressure, so got a really low mortgage which is about to be paid off in 2 years.

We went on to have our DS and I had to give up work as he was born severely disabled, so we have had to manage on one wage due to his care needs.

We thank our lucky stars every day that we were sensible and didn't saddle ourselves with so much debt.

@GrandDuchessRomanov
Something turning out for the best because of an unexpected (and terrible) but unlikely happening is not quite the same as being "sensible". As others have said, getting the biggest mortgage you can to invest in the housing market is also "sensible".

@Blossomtoes
There's been a few demographic changes since the early 90s and the number of houses now is proportionally much smaller to those that want to buy. (And yes, we all know that demand means being able to buy thank you!) Also, the early 90s are unlikely to repeat for various reasons others have mentioned, and anyway, OP is looking for the long haul, and so look what happened in the late 90s and early 00s. If you bought a house in 1989, then 10 or 15 years later it was worth much more. A bit artificial to cut the clock at 1992, especially when OP could stop spending like an idiot and has reasonable equity in the property, and looking for a long term forever home move.