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

@Blossomtoes no they paid less as they had a good deposit from selling a smaller house, they had a very good mortgage as my dad worked for a bank. They were lucky to not really feel the rate rises that much.
Why would they need to pay 2m for a comparable property? They don't need such a big house anymore. They would be looking at spending about 800k on a much smaller property or a bigger one further out if they chose to stay in London.
My inlaws sold a house for about 3m a few yrs ago, also bought in the 80s. They certainly have been living it up with the "fairy money"!

House prices have kept rising because interest rates have been at record lows since the 2008 crash, so many people have very big, but cheap mortgages.

Absolutely agree & the gov should have allowed small rises yrs ago instead they have thrown more props at it.

@Blossomtoes
Just stop trying to lecture everyone on economics. You know nothing. You have strong risk averse views and think you know it all because you remember the 90s. You are not focused on OP and her situation, and really basic economics which everyone knows doesn't meant that being very risk averse is always the best approach.
The point is the house is likely to go up over time. You appear to have finally accept that is what happens - long term - to house prices, albeit there can be comparatively big dips along the way. Now you are dismissing this increase as "fairy money" and all "relative". Which is also a load of nonsense as others have pointed out. You might find more similar people to yourself on Gransnet.

I admit that my equity money is largely fairy money because I need to use for future purchases or renovations. However for my parents & others like them it certainly isn't. And don't forgot those high interest rates were very favourable for savings & investment vehicles. I think my inlaws had an interest only mortgage but were able to pay it off with a different investment fairly early. As tata says you have quite a one sided economic view which is presumably why you accused me of being the OPs broker 😆

Also the fairy money still gives you security - my house price increase fairy money will hopefully enable me to buy a bigger house with more bedrooms and a larger garden in the future. But if it all goes tits up for whatever reason, I can live in a cheaper part of the country and less nice area, and so the fairy money is a boon, and not very fairy at all.
If OP is looking to move on a longer term basis and the chances of anything going tits up and not being able to pay the mortgage in the short-medium term is slim (and it clearly is), then it's surely an economic no-brainer to do it. The fairy money either doesn't matter at all if she stays put, or it will help her with whatever she does next.

and £200 000 in equity is a decent cushion should they need to sell, even if prices go down.

Worst case, and while aware that it carries cost and risk, the OP could rent the large house, if not able to sell. But, in that respect, I'd check the rental market in the area for similar properties, to see if that could be a realistic perspective.

Tatamma are you this obnoxious in real life?

There is no fairy money if you can't sell your house and it gets repossesd. A house in this country has been a one way bet for many years.

That is, if you are able to service any mortgage until the end of its term.

A house is also a home for most people though, and most people have to keep working to pay that mortgage. So all is fine until something happens so that the debt can't be serviced. An uncertaim economic outlook and pretty much guaranteed interest rises in the nar future increase that risk. Simples

true @TataMamma

So all is fine until something happens so that the debt can't be serviced. An uncertaim economic outlook and pretty much guaranteed interest rises in the nar future increase that risk.

But that's true for anyone buying a house & that uncertainty is often more certain than renting.

yes buttermutt, but the risk can be mitigated by not having such a high mortgage that you have no exit routes if life takes an unexpeced turn.

A high earning childless couple in their 20s and 30s can become hard up for any number of reasons over a 30 year mortgage term.

Which is what some people, who may have seen it for themselves, have been saying . That's hardly news. And hardly need for the insults and rudeness thrown around by some on here.

All I know is my life changed in terms of earning after DD arrived. Salary dropped by a third cos I had to work part time. Nursery fees were £1k per month 3 days/week. Buying things she needs and doing things around the house also costs money. We do ok but financially were much better off before having a child. These are the things to factor in before taking on a large mortgage.

I can’t remember reading a thread where I’ve changed my mind so much. It reflects the op’s updates. MH problems, hating work and not saving made this sound like a recipe for disaster. Then it transpired the MH and hating work have no bearing on earnings (not sure why they were mentioned! I too have ocd but have never connected it to my career as like op, it seems, it doesn’t really influence it) and actually they save £2500 every month without even trying.

Usually with threads like this I have that suspicion the op is not being fully factual. I don’t here - op comes across as genuine but utterly disorganised and confused.

Op, I would get a big pad of paper and get all your thoughts and plans on there. All the pros, cons, obstacles and so on for a move. Ideas and options for childcare. Different scenarios about your career and your partner’s. Think about how risk averse you are - I think some of the advice on here is excessively cautious but I know I couldn’t mortgage myself to the max either. We all have different tolerances for risk and the unknown.

Really explore all of the different strands too. You mentioned hating work in this thread about finances, despite then batting it away. But does it mean you want to reserve the ability to scale back your career in future? Full time in the city and not working at all are not the only two options. If you do want to commit to working, what does that realistically mean for finances?

At the moment the thoughts about this move come across as a stream of consciousness.

But low earners can become harder up, life is unpredictable. But it's disingenuous to say there are no exit routes & in many ways higher earners have more exit routes & more protection from unexpected turns.

Many have been arguing the OPs idea will lead to financial ruin which is certainly not inevitable.

Don't do it. Don't overstretch, it's miserable having all income going on bills with nothing left for play. We moved to a cheaper property some time back.

Buttermutt don't call me disingenuous thank you. Try reading what I have actually said

@NCFC4now

I want to make it clear that I would not stop working to have children. That’s the plan anyway, even if money was not an issue and I became a millionaire.

I hate working but I hate not working (I was on gardening leave recently and there were perks but I did get very bored). It is depression.

Mental health issues = diagnosed OCD, it’s not going anywhere but it’s under control!

You don't know how your OCD would change after a child.

Don't make any decisions based on "free" childcare which can be taken away by the govt at any stage. I'd budget £1.5k/month between your return to work & until they are 5 and then you'll probably have some wiggle room.

Massive mortgages are restrictive & life limiting. I wouldn't do it. Plus what happens if you do split up (you mention divorce) and neither can buy the other out - it's a money pit.

I have read what you said, try reading what I've said.

We don't know enough about the OPs circumstances to assume she has no exit routes

[quote TataMamma]@Blossomtoes
Just stop trying to lecture everyone on economics. You know nothing. You have strong risk averse views and think you know it all because you remember the 90s. You are not focused on OP and her situation, and really basic economics which everyone knows doesn't meant that being very risk averse is always the best approach.
The point is the house is likely to go up over time. You appear to have finally accept that is what happens - long term - to house prices, albeit there can be comparatively big dips along the way. Now you are dismissing this increase as "fairy money" and all "relative". Which is also a load of nonsense as others have pointed out. You might find more similar people to yourself on Gransnet.[/quote]
No, you’re right. I stopped talking about OP many posts ago. I’m not lecturing anyone. I’m not being rude to anyone or insulting them either, tempting though it is.

I’m not being rude to anyone or insulting them either, tempting though it is.

You called me financially reckless 😆.

I'm still intrigued as to why my parents have to spend 2m on their next property, I mean London is expensive but not quite that expensive.

@wewereliars

Tatamma are you this obnoxious in real life?

There is no fairy money if you can't sell your house and it gets repossesd. A house in this country has been a one way bet for many years.

That is, if you are able to service any mortgage until the end of its term.

A house is also a home for most people though, and most people have to keep working to pay that mortgage. So all is fine until something happens so that the debt can't be serviced. An uncertaim economic outlook and pretty much guaranteed interest rises in the nar future increase that risk. Simples

Perhaps you haven't been reading some of the crap @Blossomtoes has written? There is no fairy money if you can't sell your house and it gets repossesd Not true at all. If you buy a house for £500,000, with £200,000 in equity, can't keep up with payments and it's repossessed and sold for £600,000, then there is very real money that is still yours. It is only when you do not move that the increased value can be described as fairy money. (Even then it can help you remortgage for a lower rate because your equity is higher, and can provide you with reassurance should the worse still come.) The repossession though is unlikely: a) they are clearly savvy people and they would sell for more before it came to that; b) there is no reason at all to think this is on the cards.

A house in this country has been a one way bet for many years.
And long term, which is what OP is talking about, it still is.

That is, if you are able to service any mortgage until the end of its term.
Nope. It's still a good investment and still a one way bet in the long term, even if that is not as long as a full mortgage term.

A house is also a home for most people though
And it is for OP. She's looking for her forever dream home, not a short term investment, where the economics would work very differently and it would all be much much more risky.

So all is fine until something happens so that the debt can't be serviced. An uncertaim economic outlook and pretty much guaranteed interest rises in the nar future increase that risk.
Well, it might be the right thing anyway, and that is really my point. If OP couldn't pay for the new mortgage say at the end of a 5 year fixed term then she would still have made money - not fairy money at all - even if she had to sell up. Interest rates rising in the near future is a good reason to move and lock in to a good rate now.

Simples
Indeed it is! Three sources of income, only slight increase in actual payments being made, guaranteed long term house price increase, and dream one. And she's still only 27!!!

No way would I do this.
Far too risky.

"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."

Present interest rates are currently at a historical low. They will go up. Inflation is going to be kicking in big-time soon, and that means interest rates will be increased to try to control it. How much will your monthly payments increase if your mortgage rate increases by 1%, 2%, 3% ... 10%?

This plan wipes out your savings and as you said, it "would mean we can’t really do a step wrong". And if you haven't built the inevitable inflation and interest rates rise into your calculations, sorry, but you have already done a step wrong.

I'd really recommend reading some of the Mr Money Mustache blogs. He's in the USA and a mad keen Financial Independence Retire Early person. I take a good chunk of what he says with a pinch of salt - e.g. I am quite happy to pay someone to look after my house because I like my job a lot more than I like cleaning.

But he does do a really good job of dissecting and actually almost flipping entirely the attitude have in your mind that you need a bigger house to be successful.

I have to stop and think back to them sometimes lifestyle creep is really really easy and it's important that is conscious not accidental at least.

OP speaking from experience I wouldn't leave yourself with no room to manoeuvre.

We recently moved into a much bigger house. It's a renovation project and we extended our mortgage a bit to give ourselves some capital to do the works. Luckily our mortgage is still small as we had loads of capital in our last place and moved out of London to a rural area where property is cheaper - but our bills and house maintenance costs are much higher here, which comes with having a bigger house.

Shortly after we moved I got diagnosed with cancer and have been in and out of hospital ever since. I didn't have critical illness cover/income protection insurance. I've retained my part time salary but lost all the freelance income I would normally make on top - about 1/3 of my income. DH has also had to cut down on work to look after me and the kids. The mental and emotional strain on our family has been enormous as you can imagine. Luckily we've not fared too badly financially as we haven't gone out much (at all!) and our mortgage is low so we've been able to absorb the drop in income without going into our savings or into debt. But a big house with significant upkeep does feel like a burden at times like these.

I guess my point is that life throws you curveballs and you need to have enough flex in your lifestyle to absorb some blows. There are a million reasons why you may not both be able to work to the same capacity you are now - and why you may not want to. I would hate to be in a situation where your options were keep your nose to the grindstone or lose your house.

Interest rates are very low at the moment and have been for many years. However, with fuel prices increasing, wages being pressured to rise and general shortage of labour pushing up costs of materials, inflation is set to increase. To combat rising inflation, the first thing the BOE will do is to raise interest rates. If you maxed out the amount you can borrow and rates rise by say 2 or 3 % - base rate would still only be 2.5 - 3.5% which is much lower than it has been for 40 odd years before the 2010 crash. Just calculate what would happen to your monthly payments should interest rates rise. If you get a 5 year fix that you can afford, and if after 4 years rates have risen meaning your next rate fix will be unaffordable, sell up, take the extra equity and downsize.