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

@Camandmitch (great username) yes it’s scary and I have no idea why it’s not stopping my mind running. I keep dreaming of the house (I have seen ones that I’d love!) and it overcomes all my feelings.

Our net income is £8k per month, I get a bonus twice a year I don’t count in this but after tax it’s not a big deal.
For arguments sake I’ll say £3k a month mortgage
£1000 a month to cover bills and subscriptions

We only drive old cars and we have no other debts. In my mind the maths work but I KNOW I’m missing something.

The main problem would be our lifestyle, we go on holiday and lot and enjoy spending on meals and socialising which would 100% have to change.

I think I know this is all a stupid pipe dream

Don't do it.

It's better to continue to over pay and build up equity which will give you more options if you need to move.

Why won't your compromise on area? It's the usual compromise to get a bigger house when you need one.

No. Save any such decisions for when the kids are here. That made a big difference for me!

We ended up moving out of London and the place we loved for somewhere which was much better for us as a family.

@buttermutt obviously this is just our mortgage broker laying it out to us at present finances so nothing set in stone. It’s 34% of our current net monthly income (2.7k/8k) - it would be 5 x our salary with a calculator - so really maxing ourselves out!

@buttermutt

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??

While i have it, I don't trust insurance companies after previous experience. 😁 Tin foil hat here

£1000 for bills seems to be hugely underestimated. If you have a child then childcare alone will be well over that in London.

I think we’ve had interest rates low for so long that people forget when they were at 12% and more.
When I bought my first flat that’s what the interest rate was. 12%. Could you afford that?

Absolutely nuts to max yourself out. Like you, we're in a Victorian terrace. We have watched friends upgrade and max themselves out each year on bigger houses and more expensive mortgages, with no wiggle room for the unplanned financial burden of actual life, or any money for the fun stuff.

@Twizbe it’s DH that won’t. We love our town so won’t move from that but there’s an area further from the train station which has some gorgeous detached houses for under £1m which I consider a possibility but DH won’t. He likes our proximity to the independent shops and bars etc

What if one of you developed a condition that you couldn't work or had to massively cut your hours.

But surely this is relevant for anyone buying a house unless you are paying cash.

In a large four bed home, your bills alone could amass to over £1000.
I live in a 2 bed flat, and our essential utilities are over £700.
Whilst you may think you can afford the mortgage payments, you haven't factored in the jump in price on all your other monthly payments.

The main problem would be our lifestyle, we go on holiday and lot and enjoy spending on meals and socialising which would 100% have to change.

Imho it's not worth it.

The cost of life cover/income protection for those salaries and that size mortgage would not be insignificant.

You might want to fix your new bigger mortgage for as long as possible to give you certainty which will in itself push the rate up. I certainly wouldn't want to have a variable rate in the next few years - who knows what's round the corner. I bought my first place in 1992 and completed just before Black Wednesday. Went into work one day with interest rates at about 7% and by the time I finished work that day interest rates were 15%. Absolutely terrifying!

Try putting in rates of 5% or even 7% and see what that does to your monthly repayment figures.

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.

It really depends, my parents house is worth about 2m & CT or similar to my small house & their home is far more energy efficient so similar bills.

@Lucifersleeps 12%!!! Oh god. In my head I just can’t imagine it happening but I know I’m purposefully being naive. I’ve just done a quick calculation and we’d stop being able to afford the payments if after a 3% change.

You’ve convinced me I’m an idiot.

@buttermutt

What if one of you developed a condition that you couldn't work or had to massively cut your hours.

But surely this is relevant for anyone buying a house unless you are paying cash.

Yeah, so we bought a house with a mortgage payment low enough that I could drop to part-time post-baby or we could survive on one salary plus savings for a few months.

You take home 8k a month and are worried about a 2.7k mortgage?

[quote NCFC4now]@Twizbe it’s DH that won’t. We love our town so won’t move from that but there’s an area further from the train station which has some gorgeous detached houses for under £1m which I consider a possibility but DH won’t. He likes our proximity to the independent shops and bars etc[/quote]
Then DH needs to adjust his expectations.

Tbh, for now, enjoy the house you have. Don't worry about potential future children or £1million houses.

Together you can start planning the next steps for your lives be that children or not. Work out your finances and what makes sense and what works.

Life changes dramatically after kids and all those things he thinks are important now, might not be then.

Reading the updates though I would caution against going over 30% because you want dc & you don't know how you will feel re hours once you have dc.

I gave up my career & then went into a lower paid one.

[quote NCFC4now]@Lucifersleeps 12%!!! Oh god. In my head I just can’t imagine it happening but I know I’m purposefully being naive. I’ve just done a quick calculation and we’d stop being able to afford the payments if after a 3% change.

You’ve convinced me I’m an idiot.[/quote]
😳
That's a nope!
I don't know what yours is but my rate is 2.1%.
The thing now is that interest really has nowhere to go but up

I think you’re mad.

What about if you lose your job? Working in the City is not secure. Amass some more equity.

You are very young there is plenty of time!

If you want kids you need to factor on their costs. Working in the City you may well find you need a nanny and you’re loooking at £35k/40k at least. And that comes out of your post tax income.

Plenty of time for larger house!

Don't do it unless you can fix for long enough you are likely to have a positive change in circumstances by the end of the term. Interest rates may have to rise quite significantly to control inflation. You could end up unable to meet your mortgage.

You are next to the shops and bars that your DH loves and won't be able to enjoy because you'll be mortgaged up to the hilt?

You've already escaped your poverty. You have choice. You don't need to prove anything to anyone. Your choice is an achievement. Well done, sincerely, well done.

I think you'd be best off sinking some money into a chat with a therapist about why having an extra bedroom is so important to you.

We have the same problem with parking, but I would rather pay a lower mortgage and put up with it to be able to afford nice holidays and generally enjoy life. Having children doesn't really affect the stress/parking situation, you just go with it ...

My son's nursery in NW was £475.00/month for 2 days a week, 30 'free' hours kicked in September (he was 3 in May) so is now £110/month for same days. I am due to go on mat leave so my income will be drastically reduced over the next year (you may get a decent maternity package but I don't so it will be a struggle)

So IMO I'm with your DH i'm afraid!