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

YABU in my opinion. I'd be utterly miserable having no spare money to do anything other than pay the bills. I live in a 2 up 2 down Victorian semi with no driveway and a tiny garden, but my mortgage will be paid off before I'm 50, I can afford hobbies and holidays for DS and I and that's far more appealing than a driveway.

You have to be able to live and not just work to pay a staggeringly high mortgage for the next 30 years! What about meals out, clothes, holidays!?! Children would benefit far more from a good lifestyle more than a bigger house! If you want a bigger house then move if you don’t want to compromise on the location stay out. I would rather look back on my life with happy memories.

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.

We have a similar budget but plan to move to a cheaper part of London next yr so our house will cost less then what we are selling. I think the next few yrs may be quite certain in economic terms.

The female doesn't have to be a SAHM or reduce to PT or pay for nursery if they have fit and able family who would offer help or if her DH would reduce hours or take a career break to raise their family.

Did you not read where she said they would both go part time?

Tell you something else, we had kids and one of ours was chronically sick. He recovered, my career did not. You can't budget 1k a month nursery fees for the future, or that you will both be earning "x" in 5 years because you don't actually know what will happen and if you have no wriggle room it can make a stressful situation impossible.

@imnotdefensiveyouare really appreciate this perspective - thank you!

@imnotdefensiveyouare

I feel like I've stepped into Mumsnet of yesteryear 😭 comments like 'what if you don't like working' and about having DC / multiples. My goodness it's 2021! The female doesn't have to be a SAHM or reduce to PT or pay for nursery if they have fit and able family who would offer help or if her DH would reduce hours or take a career break to raise their family. Personally I don't see the issue with having circa 40% of your take home left after mortgage and monthly commitments. Especially when it's 40% of £8k! DH and I have a larger monthly mortgage and we make it work. We have to unless we want to find ourselves homeless. I returned to work FT after both dc and DH is stepping up to better manage the childcare arrangements. The risk of job loss etc is valid when entering into any long term financial commitment. Just be cautious regards what you will be happy with in terms of your reduced social life, holidays, savings etc as these things will change significantly, particularly in the early years.

She literally says in the OP that "she hates working"

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

Why don't you spend a year pretending that the money you spend on holidays, meals, socialising etc doesn't exist. Save it instead. Then you will have good idea as to whether you can cope with a far more modest lifestyle, plus you will also have saved up a load extra that would reduce the mortgage you had to take out if you did buy a bigger house.

But YABU to keep saying that a 4 bed detached in a good area that costs £1M+ is nothing fancy, when it's something that's massively out of reach to the vast majority of the population. It might as well be on the moon it's so inaccessible to just about everyone.

Pretty sure it’s below £100k taxable income? If one of you is above this you won’t get the 30 free hours or the tax free childcare scheme, unless you reduce it to below £100k with pension contributions from gross income.

I probably wouldn't go past 4.9 x your salary & that would be if you were 25 so more earning potential or if your dc were in school.

I've got twins, our plans went out of the window with double at the same time childcare costs. I would always mortgage under knowing what I now know.

I would go for it if that's what you want.

There's a fair chance your earnings will go down post-children. So better to borrow as much as you can now. Even 50% of your income is pretty normal in London, and when you have a decent income there is more wiggle room.

Thing is, children will change your lifestyle a lot if you do have them. You’d have to change the nice holidays, meals and socialising for financial reasons if i’ve got this right - and then would need to pay lots in childcare and have this enormous mortgage as well. Right now it’s a dream to you but how long will it remain that way once all those changes and added pressures bite?

You’ve not considered nursery fees so have you considered schools and catchment areas? Because that comes at you fast if you have kids too and if this house is not in the right area for school and childcare etc. that can be an added stress. Or you may be considering private education in which case that’s another large financial commitment.

Might seem very soon to think about this stuff but it could easily be your reality within a few years so it needs to be factored in. Of course, guess you could sell and move if needs be but I guess also there are no guarantees what the housing market will be like then.

We are in the fortunate position of being able to very comfortably overpay our mortgage. Including overpayments, we pay c. £3k per mth, plus extras at bonus time, and still have plenty left over for holidays / savings / renovations. However, our mandatory mortgage payment is only £1k pm. If one of us got sick, or lost our job we could still pay it.

There is no way on earth I would commit to a mortgage that required my to stretch to my absolute limit, with no leeway for unexpected events.

The stress of it would be high, and a mortgage that size takes away your choices. You wouldn't be able to go part-time if you want/need to. Neither would your DH. You wouldn't be able to build savings and take a sabbatical to go travelling. Your saving potential would be low - what happens when something goes wrong with the house?

Extra rooms are all well and good, but they don't mean happiness.

@NCFC4now you are blissfully naive on the free hours!

They won’t cover enough childcare to work in a full time job which you clearly need to still get £8k per month. It’ll reduce your cost slightly. This is London and everything child related is expensive.

Don’t do it! We’re just in the process of buying a 4 bed detached in the south west for £355k. The mortgage is £1200 over 28 years. I couldn’t fathom paying more than twice that for a longer period of time.

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

Well the housing market would be dead if people didn't borrow a certain amount vs their income.

My advice would be to stay put til your youngest is at school (you will still have childcare costs at this point but not so huge) then think about moving.

Interest rates will rise but it's highly unlikely we will see 12%. The housing market is the economy hence all the props.

What will you do if you get the house and something happens? If someone gets sick? Your child is disabled? Some other wild variable?

Your plan is all well and good if it happens exactly how you plan it out but IME it never really happens like that. I wouldn’t take a mortgage out where one small thing would fuck everything up, you have to have a little bit of leeway.

Absolutely no way I'd mortgage myself to the limit. It would constantly make me feel on edge and take away my sense of security. I suppose everybody is different with different priorities but I'm definitely with your husband here. We went for a mortgage which was at around the 60% mark of our maximum affordability, so that we are comfortable. They also took any future children into consideration when calculating the mortgage and having now had our DS, I'm counting our blessings that we didn't over stretch as he is in nursery 2 days / week and I had to go part time and we are managing. Nursery days vary hugely across the country, ours is £65 / day. Free hours start from 3 years old, 2 if you are are a low income family.

@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.

It's not net income as in net of tax, NI, student loan etc.

It's 'adjusted net income' which is gross income incl bonuses plus any BIK like a car or private healthcare, minus pension payments.

www.gov.uk/30-hours-free-childcare

You can work out ANI on the page that will tell you that you earn too much to get CB.

Jesus, how have you even been approved for an £800k mortgage on a £100k income?
DD is a Teacher on £50k, her partner earns the same, they were offered a £350k mortgage and still didn’t go up to the limit, their 4 bed detached was £268k and they pay £1200 a month, they have nursery fees for another year and currently have a very strict budget. Energy bill and NI increases are going to hit them hard.

I also think a large mortgage is better when you have a higher LTV, in your example it's 20%?