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

@RubyJam omg that is so expensive. Yes SE.

He’s on a decent salary as a teacher but his side business earns a lot. I work in City finance so my income is high.

[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]
I agree with @NCFC4now, I would factor at least 1k per month per child considering full time....of course less if part time.
Free hours kicks in when they are 3yo but I do not know the details because I am not there yet!

In short, don’t do it! Being house poor is soul destroying!

It’s not just the increase in mortgage though is it? you have to factor in higher council tax, higher energy bills and maintenance costs of a larger home, not to mention the possibility of higher interest rates, people always focus on just the increase in mortgage payments but there is much more to consider.

@Bootikin unnecessarily harsh.

Yes we are aware. DH only works with schools in highly deprived areas. We both volunteer in the food bank. We spend our days seeing it first hand. There is nothing entitled about wanting to do well having come from nothing.

I don’t know about childcare costs because I am not trying for a child and I have endometriosis so I try not to focus too much on it in case it can’t happen for me.

I’d do it but then I’m a risk taker with a tendency to act now think later.

The sensible solution would be to stay put but I work on the basis things always work out.

2.7k might be 34% of your income but as well as that all your bills will be higher, such as council tax and heating/electricity.

Childcare is extortionate when children are small, and even at primary age you’ll need before and after school care.
What about your maternity leave? Sounds like you’re by far the high earner.
You’ll save on holiday care since your partner is a teacher, but that won’t help before and after school.
In the current climate I’d be reluctant to mortgage myself to the hilt, especially when the expensive bit hasn’t started yet (small children).

Nursery for my DD is £1060 for 3 days a week 51 weeks a year. I can use tax free childcare so I get £2k a year reduction. However, to get a £800k mortgage you or your DH must be over £100k salary so you won't get that deduction.

If you're both part time will you be able to afford the mortgage? Will you need nursery if both part time?

Your mortgage scares me!!

Bonkers.

He already wants to go PT. you have no idea whether you’d want to even go back to work or not post-partum (many don’t).

Has your mother agreed to provide childcare for 3-11 years and agreed not to become unable to deliver for this period of time?

If £2.7k represents 34% of your CURRENT income, this would suggest you are the higher earner.

Do this and your Victorian dream may well be built on sand.

What if you get pregnant with twins? Selective abortion? Why a 4-bed if you’re only planning 1 child?

You’ve got a bad case of eyes bigger than your belly.

I hope you don't mind me saying this but what you need to work on right now, rather than worrying about what you might do in a year or two, is REALLY work on your reaction to the parking situation. I live in a simar house that's one road away from the sea, so summer months can be madness when it comes to parking.
I can chose to either a) fuss, fret, get cross and irritated by driving around looking for a place to park and carrying bags back to the house or b) calmly accept this a price of living in an area i love, in a home which is warm, cosy and big enough for my family. You can't change the parking g but you can change your reaction.
If stress about parking is causing you this worry, then imagine the stress of having a mortgage you can't afford. There is nothing aspirational about a life with you worrying every month about where the money will come from. That sounds like the quickest route to mental health issues to me.

Thanks for the help @RobinPenguins.

I think I have been slightly ignorant on the % front. I’ll play around with some of the graphs to see what it would be.

I do want to stress to everyone there’s actually not a massive difference in the size of the property to the one we are in. I am talking a bog standard 4 bed, off street parking, an ok sized garden. Nothing fancy here. We are in the commuter belt for London… will probably help people realise I’m not after a mansion here!

What ever you decide obviously wait u til your fixed rate is done

But honestly

Mortgaging yourselves up to your eyeballs is not worth it.

Put it this way when your old and look back on your life you and your husband and children if you do have some will look back on the fun adventures you had, days out , holidays, hobbies and smile and be grateful not look back at the great parking and large rooms in your house and think wow wasn't that wonderful

Why so you want a 4 bed house if you don’t even have kids yet?
Surely you can find something smaller with parking in an area you want.

I don't think parking is essential for dc however mortgage lending is much stricter these days so if you can i borrow it I'm not sure why that automatically means you've over leveraged yourself.

A 2.7k mortgage is meaningless unless benchmarked against your income & if it's under 30% I'm not sure what the issue is.

For me it would be a huge no. You have no idea what is round the corner, my biggest worry would be health. What if one of you developed a condition that you couldn't work or had to massively cut your hours.

You would be mad to put yourselves under that amount of pressure.

I think the days of huge mortgages and fancy cars as outward indicators of success are over. Especially at the expense of happiness and good mental health.

I get the annoyance with pack of parking. We have street parking, would live a dtive, but would push us on mortgage to the point that it wouldn't be doable on 1 income. Which was my rule in case something happens to one of us. I still check them on zoopla tho😂
I would stay put if it's just that.
I would appoach the neighbours about trim on the trees. Not cutting down. Just a trim to give you guys more light.
That's it.

You can have insurances if you are worried re losing income or illness.

MNs I find are often over cautious however I assumed you has a high income but then you say about the free hours??

@Flup

You would be mad. The cost of children alone would make a huge difference to your finances short term and long term. Interest rates can go up, probably will go up. That alone might make it unaffordable. Reckless to leave yourselves with zero savings.

There are many, many places in the UK where you could get a 4 bed house for a fraction of £1 million, teachers can work anywhere.

Yes, agree with every word. What if the rates have increased when you remortgage in 2 or 5 years? They have never really been as low as now. You'll get an illustration which will say that if rates go up by x% you could pay up to £4k a month or something.

I suspect, in an affluent area, nursery would be approx £1k per month for 3 days and that's for 2.5 years (end of mat leave to term after 3rd birthday). You'll thereafter have 2 years of 22 hours all year or 30 term time but there are surcharges and it won't cover all of the hourly rate of an expensive nursery. And that's if you only have 1!

I think if you'd be at point of just affording the mortgage then yes yabu.

Could you not build your own garage?

Do not do it. Is there no middle ground for you? Honestly the big, dream house is not worth the sleepless nights when things go wrong. You have the potential to have a really wonderful, comfortable life. If you have DC you could go part time, have wonderful holidays and adventures with them, save for their futures (uni, house deposits), retire early. All those things are far more fulfilling than being able to park close to your home.

We could have stretched ourselves to the limit and I thank my lucky stars every day that we didn't because at the age of 40 my health is failing and being having no mortgage has enabled me to reduce my work hours massively.

It doesn’t matter whether it’s massive or not, at £1million the council tax will be big, the heating bills will be bigger, the maintenance will be more, the electricity will be more, even the insurance will be more.
Will you have any wiggle room? What if one of you can’t work, loses their job, has a child with additional needs that means one of you has to be home full time, gets ill and so on.
If you have to spend all your savings to buy it, what happens if you need a new roof or whatever.
The economic climate is highly unstable at the moment and I think the price to pay for covid and brexit hasn’t even been close to realised yet.

Lived in a similar house in London. Parking occasionally a pain but really not a reason to move house. Shopping gets delivered and we mostly socialised on foot with a pram. But in London most people don't bother to drive as it's just faster on foot. When they outgrow the pram, they move to scooters

Childcare is anywhere from £1500 up to £2k per month for 5 days pw in zone1-2/3 in London for a nursery. Ours was easily as much as our mortgage at the time and most people have more than one child.

You've financially done well and have built up great equity. Can you look for a house you can extend? That's how we got to the living space we needed without the £1m outlay. If you are prepared to live in a building site you can save a fair bit, pay lower stamp duty and get the finishes you want.

If it’ll be that much of a stretch stay where you are. Especially if you might want more than one child.
Im in the south east, have one child in nursery 3 days per week which is £75 per day. Given your stated finances it sounds like one or both of you is a high earner, you may only be eligible for 15 hours free nursery from the term after a child is 3 - and it isn’t really free. For us it took off about a third of the cost of 3 days per week. You might also not get child benefit - or have to pay it back if you do. Plus children cost more than just childcare - food, clothing, energy bills are likely to increase, kids activities, it all adds up.
For me it’s not so much the money as the time, the extra tidying, cleaning and laundry that came with kids that have also put pressure on us, you don’t want to be in a position where one or both of you wants to reduce work for your mental health and you can’t afford to.
I would prioritise living well in a less fancy house than potentially being stressed and unable to do anything fun but live in a bigger house. You can always reconsider in two/five/ten years, not doing it now doesn’t mean not ever.

Im surprised they are lending 34% of your income though. Are you borrowing 5.5 x your salary??