To feel worried about the cost of this purchase

[treesareyellow]

We are putting in an offer on a house tomorrow. The mortgage payments will be £500 more than what we are currently paying in rent. We have been cleared by a broker to borrow well over the value of the house we’re offering on, so that’s not the issue.

We won’t be on the breadline but I’m a little worried at the thought of losing that £500 each month - a big proportion of it will be interest as todays rates are 5%. It’s 30% of our joint income, we will progress in our roles but very slowly. At the moment that £500 is our fund for holidays, days out, overnight stays, basic clothes, footwear and birthday gifts for others etc. If we buy this house we can feel secure knowing we’re homeowners but what fun is that if you have zero money after essential bills each month to actually enjoy life, never mind save/repair the house if need be

AIBU to worry or are things this tight for everyone at first?

Btw, can’t buy a smaller property as flats are few and far between in our area and we would then need to upsize soon and dont want to risk negative equity trapping us somewhere too small

I'm assuming that £700 is spending for two people, so £350 each? If savings have to come out if that too, then it will be a bit tight, but do-able.

Your wages are likely to rise, and rates may go down by the time you remortgage and/or you'll have a better ltv, so the most expensive period will likely be the first couple of years. I think it's worth being stretched for a couple of years for the longer term benefits of home ownership.

Just don't go on holiday for a couple of years, or don't buy clothes. Most people have enough in their wardrobe to see them through a no buy year or two.

OP, it's always tight at the beginning for FTB's. About a third of joint income is a sensible amount to be paying on a mortgage. If you get a fixed rate at least you know the outgoing Will be the same every month. £700 after bills is still a good amount to.have. To give you peace of mind try to build a little next egg for savings. As you progress in your careers and your salaries go up it will become easier. When we first bought our house 17 years ago we were going to pay £799 a month mortgage and this was about 36 percent of our joint salary. I was a teacher but I just did a bit of tutoring two evenings a week to make extra cash. DH got a couple of bonus at work and we got through the hard first 2 years. After that things got easier. When rates went down we carried on paying the same amount. Now we have just paid our last month. We completed our mortgage 4 3/4 years early. You can do it and can probably cut back on a few other things.

I don't want to derail OP's thread, but after bills and expenses we'll have around £4K - and I'm not undermining that, or saying that it is a small amount, of course it's not (I grew up poor, I can remember spending my last £10 and knowing that no more was coming for weeks) - it's just a big change - and change is often scary.

£3,500 pm may well buy options in London, but not near where we are now, and if we have to leave the area, we might as well head somewhere which feels a bit cleaner, safer, and gives us more freedom as our daughter gets more independent.

But you said * it was grotesques that we still have to leave the city to get enough space for the family* not you can't get the space in a posh part of London....

I don't want to derail OP's thread, but after bills and expenses we'll have around £4K - and I'm not undermining that, or saying that it is a small amount, of course it's not (I grew up poor, I can remember spending my last £10 and knowing that no more was coming for weeks) - it's just a big change - and change is often scary.

Change is scary but I don't think it will be too much of a struggle to save if you have 4k after bills.

Thank you for this

You need a budget, but if you have £700 after bills then you sound fine imo.

What savings do you have? It sounds like you need to build these up after buying.

Buying a house is a big step so feels daunting, but £1200/month on discretionary spending is not necessary.

You have £700 for a family for everything other than essential bills, so for any discretionary spending, clothes, haircuts, school trips not to mention savings, things in your house breaking or needing repaired and part time childcare is coming from the same pot of money!
I think you’re mental to consider this and I can’t believe so many people don’t see the issue. No wonder so many people financially struggle.

Oh 🤣🤣🤣🤣 Are you living in the same world as me?
We (boomers) were lucky if we had £10 a month left over after essentials (which included the Littlewoods catalogue payment where we got all clothes, shoes and household stuff. Any emergencies went on the credit card.
Bet you whinge about people like us who bought our houses cheap. You have no idea.

We did the same in our 20s. It didn’t take long for earnings to increase in proportion and things to get easier bit by bit (well after a scary bit!). Now over 20years on the decision has left us financially comfortable. I think most people have to go through this stage.

If you are able to save 500 a month from your current income and have a good amount of savings already, then fine. But if not then you're going to struggle I think.

I would spread the mortgage over a longer term to reduce the monthly repayment, and try to overpay your mortgage by the maximum allowed each year.

I would have thought that most people spend 30-50% of their income on housing if they have mortgage or rent. Yes your readily available savings will be gone for now, but they will be invested in property instead. Buying something that big means a couple of years with no holiday and fewer days out etc, but surely worth it?

If you had £1300 previously you were probably quite lax with it.

My monthly budget has halved since lockdown, but I am fine, I just think twice or three times before buying, where before when steady ££ was coming in I would just buy. Less gets frittered, I eat out less, don’t do spur of moment ‘just because’ meals or drinks out but have enough occasions or meeting a friend. I buy a lot less clothes but am not dressed like a scarecrow (mostly).

You will be fine as long as you keep check, build a boiler / car repair fund etc. I think it’s normal to be on a tighter budget for the first few years of mortgage-paying.

It does feel scary when you first commit to a mortgage. Every time we have moved house and up the ladder we have been worried. But every time we found that things worked out - we adapted a bit here and there and did not notice a major drop in standard of living.

Just seen your post that childcare has to come from the £700. Hmmmm. Have you got a child yet?

OP, honestly I don’t think we can give any meaningful view without a full , clear , accurate picture of what your total income covers.it’s all too confusing and too much guesswork and assumption.

Were you saving towards a deposit before? Does your ‘with mortgage’ budget include any savings?

Tell us :
your combined net income
Mortgage payment
your total utility bills incl CT, phone contracts
Car costs
Food / grocery bills
Childcare costs

I can see it's tight, but it is doable.
I think it is normal for the first few ( several ) years of home owning to be on a very tight budget. I know when we first bought ( many years ago), and friends were similar, we just didn't have new clothes, paid-for outings, holidays, takeaways etc. We didn't have new furniture, and were very good at making do and refurbishing. Socialising was at each others houses, or picnics in the park when the children were little.
The point is, that the house is your security long-term, and we thought it was worth putting everything we had into achieving that. I have friends who didn't, and at the age of 60+ are in the unenviable position of trying to find rented accommodation they can afford on a pension.

If you don’t have DC yet you could think about having a lodger for a while - not necessarily immediately but as a plan B if you did find money tight.

Well what’s your alternative? A cheaper property? Continue renting? Despite what people might think it was normal to be absolutely broke after buying your first property. There are a zillion stories out there of scrimping and sacrificing to get on the property ladder. When I bought my first property I didn’t have two pennies to rub together and had sleepless nights wondering how I was going to manage but manage I did. I cut my cloth, I shopped at lower end supermarkets, I kept to a budget (this was early circa 1990), etc. I’ve since gone from my tiny one bed flat and sleepless nights to a 4 bed detached mortgage free so yes it was worth it to me.

Does the £700 need to include food?

I'm in a similar-ish situation. Renting in London - our previous rent was £1200 less than us buying/ getting a mortgage now... but if we stick to renting we will now need to get a bigger place (extra room plus garden for a dog and baby) so IF, if we can even find a suitable rental in the current climate it will still be less than a mortgage but only by £300-£500 a month! Which I know is a lot but what's the alternative, giving a landlord 35% of our post tax income instead of us spending 40% of our post tax income on a mortgage?!

Yep! So tricky

Thanks this is already 35 years!

I agree. It sounds like you can comfortably afford this OP.

I would prioritize an emergency fund, that should take some of the pressure off.

My second piece of advice is to wait a year before doing any big renovations or decorating. That is typically where people go a bit mad with spending on their house. (For sure do anything that is structural or could cause damage if not addressed in a timely manner). The other thing about waiting for a year is that you’ll give yourself time to really figure out how you live in your house. No sense in buying a really expensive table and chairs for the kitchen if you find you prefer eating in the dining room as an example. Or painting the lounge a dramatic dark color to find that during the winter the room doesn’t get a lot of sun and and it feels like a cave.

This will allow you to focus on saving for these types of things vs running out and using credit or having to redo things a short time later after changing your mind.

Good luck, it’s a scary step, but if you’re careful it will be fine!

Yeah the first couple of years were hard. I remember sitting on deckchairs, and not going out much - but that was only for a couple of years. It was about 60% of my take home at the time. (I bought on my own.)

I do remember my dad telling me that I also needed to live, though; so I didn't borrow/go up to the limit of approval, because I wanted to be able to buy a birthday present, or fix my car. Now my mortgage is almost paid off, and I know how fortunate I am - but it's only about 20% of my take home now.