To buy a £700k house on £67k

[Polledja]

My wife and I are looking to buy a house. I was very foolish with my money during my younger days so am behind my peers.
we want a house near a good school and houses in that area range from £550k to £700k. The ones my wife likes are at the higher end but I don’t think we can afford these. She has become withdrawn and depressed during this process and it caused allot of tension.
I have approx £280k for a deposit (this is all our savings bar £18k). We can borrow £350k based on our joint salaries of £67k. It leaves me £90k short. I think I could borrow this from family.

our net pay is £3900 per month. We would have £2000 tonoay on our mortgage leaving us with £1900 to pay everything else. We have two young kids at school. Our monthly expenses excluding our mortgage are about £1600 so it would meaning having nothing left each month

@pinkbaglady

Worked in what way? The truth is that if you die before your early retirement you have saved for nothing.

That isn't to say you shouldn't save but this is about risk assessment and balancing outcomes/ priorities.

Its interesting how being sensible is often seen as being stupid, particularly on here and particularly in respect of money. Our mortgage is paid off now because we moved out of London to a cheaper area

We havent done quite as well as being able to retire early unfortunately but having no mortgage decades before retirement age is such a relief.

@bellac11

I don't think being sensible is being stupid at all. We also left London for a different city - so we could buy a family home in a nice place and not be slaves to a terrifying mortgage.

This allows us both to work 4 days a week and have a fantastic quality of life right now.

But I disagree with the point that some posters on this thread have made that spending the bare minimum on a house so you can pay it off as quickly as possible is necessarily the best decision.

Haven’t read the full thread but your posts OP suggest you have been putting probably £30k a year away into pensions. If that is right, you can reduce the pension saving and perhaps use some of that to go into ISA or mortgage repayments.

I would say go for it, but I’m sceptical about you getting much more than £280k mortgage.

Forget the child benefit. If you want it then continue to maximise your pension but live in a smaller less desirable property.

No one is saying being sensible is "stupid", but the fact remains that spending under 20% of take home pay simply isn't feasible for many people due to how expensive houses are. The solution to this isn't just "move to a cheaper area" - our family support systems, our jobs and our lives are here, and I would not give those things up to live in a "cheaper area".

Added to that, I grew up in a shit area and I don't want to bring my kids up in one. In the SW where I leave basically anywhere cheap is also shitty. I don't care about schools as my DC are home educated, but I don't want to live somewhere the local amenities in walking distance consist of a Costa, a Tesco and a greasy spoon.

Our household income is 140k plus bonus and we are borrowing 448k, which isn't anywhere near the max the bank would have offered us. We have a perfectly modest 4 bedroom semi. We don't go without, we have enough for a rainy day, we aren't remotely short of cash or without a buffer. We live a nice life with holidays, activities and nice days out. We have no other debt.

I agree that many people on here seem to happily encourage others to take unwise financial risks for 'dream houses'. I think that sort of advice is dangerous.

In your case, however, it sounds as if your mortgage is paid off because you were fortunate enough to be able to buy years ago when houses were much more affordable. Moving out of London can't really be called frugality either. So a large element of luck overall as in most of these cases. It's just not the same for potential FTBs now. They either stretch themselves or rent in most cases where there is no large gift from family.

With regards the @Polledja's case, he and his wife are crazy to even consider this level of borrowing. It sounds as if there are decent houses available in their area for 200K less so they should buy one of those.

I always feel mumsnet is very risk averse in terms of a general sense of having a very very low proportion of monthly income spent on a mortgage. Mine has always been much higher and if income is likely to rise I advocate some stretching is sensible or ok. But your numbers really look like it’s beyond some stretch. Especially in this climate. I wouldn’t go that far. The lower end of the range is probably fine.

@Thethingswedoforlove I agree. Unless it’s a much older demographic. Most people I know in their 30s would not think it was risky to spend 1000 month on a mortgage when they earn 5000/6000 a month.

Also agree. Especially as the equivalent house to rent would still be more than my mortgage payments!

.A steep rise in mortgage rates; fuel rates, the cost of living, would ruin you.

You can't afford a 700K house so think again. Perhaps you could afford a very much smaller house or flat in the same school catchment area.

Schools can change a lot in the space of a few years...in both directions. If your children are very small, now is not the time to pick their secondary education.

No way. Not being goady but our net pay is more than yours and the house we have a mortgage on that ends in 8yrs is only worth 250k. For me, getting into a mortgage that size on your income is utter insanity.

But you cannot afford it. Do not buy what you cannot afford.

I'm not sure if OP is coming back.

Can someone explain to me how they have an £80k job but only gets paid £50k gross as they massively overpay into a pension and to get childcare benefits?

How do you even manage this?

Op, have you looked at your current spending to see where you could make reductions? If the bigger house would leave you with £1,900 pcm, can you successfully live on say £1,400? That leaves £500pcm to be divided between house savings (for when work needs doing), general savings, and repayment to family of that £90k. If possible can you get it down to £1,200pcm? That leaves £200 ‘wiggle room’ to allow for cost increases going forward. If you can successfully do that now, in such a way that you would be happy to live that way for years, that’s great. If you can’t do that now for say 3 months, you won’t be able to do it for years in a new house.
Does your deposit include stamp duty, mortgage fees, surveys, conveyancing costs etc? If not, your budget is actually about £30k less already.
Also think about the cost of what you may want to do to a new house. Eg solar panels on the roof plus battery storage - could be another £15k but could save £100 or so a month depending on your energy bills and whether you run an electric car. For me that would be more cost effective than reducing my mortgage by £15k.

@Pipsquiggle

Op didn't explain but I think his wife earns £17k and he earns £63k but pays £13k into his pension so they can claim Child Benefit.

It's perfectly legal to do this.

Oh and that ‘general savings’ I mentioned doesn’t really include things like holidays, it’s more for things like new children’s shoes when they outgrow them yet again, school uniform (surprisingly expensive!), extras that crop up like presents being needed, birthday party costs etc. Savings for holidays need to be on top of that.
Plus, how long would you have to repay that £90k to family? At £200pcm that’s less than £2.5k p/a, so more than 30 years to repay! If they wanted it back over say 10 years, interest free (which would be very reasonable!) that’s £9k p/a, so £750 pcm. That would leave you with £1,150 pcm even before any savings. Given your current costs of £1,600pcm is that realistic?

No, absolutely not, your wife needs to come to terms with the fact you need to choose a cheaper house.

You only get child benefit if both parents have an income under £50k , so hypothetically IF the OP makes 60k and his wife 20k then they would not get it. They OP is avoiding losing the child benefit by contributing over 10k to his pension and bring his income down (in paper) to under 50k which is the threshold ..

You can currently put £40k per year into your pension before deductions, up to the lifetime maximum. It means you’re counted as earning the amount you are paid after pension contributions. If that takes you below the earnings threshold for child benefit, then you can receive CB. It’s going up to I think £60k pa and a higher lifetime maximum. So someone on £110k pa could put £60k pa into pension (no tax or NI on this) and have a ‘wage’ of £50k, and receive full CB. Also means they avoid paying the higher rate tax, which is handy. Especially when for certain workplace benefits you only pay the tax liability, which is effectively halved by doing this as it means you’re on 20% not 40%!
I know lots of people who do this as it is more tax efficient for them, regardless of CB.

Trust me, I deny myself nothing and have a very nice life - all while saving and investing

@pinkbaglady

I'm sure you do, and I hope you enjoy it but the same is also true for many people who spent more than the bare minimum on their house.

I'm just challenging the assumption that frugal on housing = financially sensible.

Houses are pretty much the only appreciating asset that most of us buy, we spend a lot of time in them and for most children, the school they go to will be determined by the house they live in.

Buying a house that is a good financial investment, that supports a happy life and provides access to good schools does often cost more than £300k in many parts of the country.

This is a BS post. The numbers just don't add up and the OP is in fairyland.

I do think a fair bit of telling half a story goes on within mumsnet- the number of people on average or just above average incomes who seem to still have very nice lives, live in good areas, have pots of savings but can't understand why everyone else isn't in that position- and go on about 'hard work' I think there's a lot more to it in many cases, bits of inheritances (or whopping ones ), bit of luck with the property market, sold businesses, being lucky enough to be married to a very high earner, divorce settlements and remarried- all kinds of things. But I don't think in 'all ' cases it's down to just being very prudent and careful- (some maybe) . If you aren't in that position (we for instance have parents in their 80s and I'm 61) then it's not nice when people come over all superior on here- far too much of that going on by virtue of what isn't always 'hard work' - there can be luck and fortuitous circumstances involved.if it was just hard work - we would be millionaires. I was back full time with a 12 week old many years ago.

Where have I said I spend the bare minimum? The OP is clearly spending above their means and I’ve pointed out that I’ve resisted doing that and still have a nice house that’s mortgage free and if I consider moving then I’ll stay under my budget.

my advice to the OP is if the houses in your area are £700,000 and you can’t afford that then you’re living in the wrong area.

When we bought our house we really pushed ourselves financially. 5 years later, our mortgage is only 16% of our take home pay as our earnings have increased dramatically. It was a calculated risk and it paid off.
For many people nowadays, they have to take a risk or they’ll never get on the property ladder. I think people who bought in the past don’t often realise this.