AIBU to take out this mortgage?

[helptodecide]

Hoping someone will tell me if this is a terrible idea or not before we proceed.
Myself (F24) and my partner (M29) have had an offer accepted on our first house. It’s £325,000 and we are putting down a deposit of £21,000. The mortgage we are going for is a 2 year fixed at 5.69% and it’s a 40 year mortgage. we can’t get any better without fixing for five years which I do not want to do in this climate. Our monthly payments will be £1600 gulp for 2 years. After the 2 years I’m hoping to remortgage at a better rate (fingers crossed the interest rates aren’t so abysmal by then!). For context although the house is expensive for a first home it is in exactly the area we want to be in, close to work and both of our families, and is a 3 bed semi with lots of potential for extension in the future (ie this could be our long term home). In this area we won’t be able to buy much cheaper (even a 2 bed terrace is £300,000).

I am trying to work out whether this is going to be affordable for us. Our combined income is at least £4500 (fluctuates between £4500 and £4800 depending on partners overtime, and I also do some online teaching as well). I’m a vet, my partner is a HGV driver, so both in secure work. We have no kids and definitely no plans for them in the next five years.

I’ve calculated our monthly outgoings on bills including mortgage, car payments to family for both of us (we both borrowed money from family to buy a car to avoid debt), car insurance for us both, council tax, gas and electric and petrol to be around £2800. This would leave us with £1,700-£2,000 month for food, social (we currently spend FAR too much on this and would hugely cut down), the cat, money towards the house (it’s liveable as is but lots of cosmetic work to do gradually) and savings.

I feel like this sounds okay, but I am currently saving £800 every month and to be honest not really having to budget at all as our current rent is only £800 between us. I know it’s an awful time to buy a house at the moment, but I’d rather take the hit for 2 years and then remortgage when times are hopefully better.

What do all you wise people think?

This is true, I guess I've only seen established vets!

@helptodecide it sounds totally doable to me and very exciting!

One suggestion though, you say a 5 year fixed will be £200 a month cheaper - if you stay on the 2 year fixed you will be paying an extra £4800 in that 2 year period than if you took out the 5 year fixed.

Have you got the keyfact sheets for both? Maybe have a close read and see which one would work best? If you can pay the £1600 a month comfortable (which I can't see why you can't on the figures you've stated), maybe take the 5 year fixed and over pay £200 a month, that will reduce your capital quicker.

I thought vets were one of those professions where they don't earn as much as a lot of people think and less than other comparable professions like GPs and dentist, so most don't earn anywhere near £50k and the conditions are worst because they're more likely to be bitten, scratched or shit on by their patients and there's more unsocial hours work. It wouldn't be surprising if the HGV driver partner earns more, despite being much quicker and less competitive to get into the profession.

I would go for it

While you've not got children is the best time to buy a house

Yes the mortgage is expensive but that's just the way it is now

In the long term you'll be quids in, and hopefully by the time you remortgage you'll have some equity/savings/improvements done which will reduce your LTV

Best of luck

100% this!!! I love my job and whilst the potential is there to earn well (as in 50/60k, it’s very rare you make more than that without specialising and taking v expensive exams), as I said it would take me at least 10 years. And that’s assuming I’ve not had kids and am still working full time. There are FAR easier ways to make money!
…..I wouldn’t do anything else though :)

I would 100% go for it, when we bought we did not have the option for less than 10percent LTV. It just was not available I think its so much better you get on the ladder as soon as you can good luck OP 👍 and you have done so well saving so much well done 👏

You should definitely go for it. With regards to the 2 year fixed or 5 year fixed, a lot of it depends on how you both feel about knowing what your payments will be for the next 5 years or willing to remortgage within 2 years. Do you want that stability where you don't have to think about the mortgage again for a few years or are you willing to put the grunt work in and do it all again in 2 years? Remember, there may also be a mortgage fee when it comes to remortgage.

I personally would go for the 2 year deal. Then when it comes to remortgage, reduce the term if possible. Two years gives you the opportunity to see how the land lies and get a feel for owning your own property and all the stuff that comes with it, as well as added flexibility. Many congrats!

Seems OK to me.
We always spend a third of our income on the mortgage.

We have just took on roughly the same ....1500 a month for five years fixed ......we are late 30s .... you will be fine and congrats on your new home !!!! Exciting

That's not true. And a 5 year fix is a terrible idea because there's no way the rates will do anything but drop over the next 2 years.

Go for it.
When I bought my 1st home in 1970, I did all my sums very carefully.
I couldn't afford it, but I went for it anyway.
It meant a lot of sacrifices, but it was the best thing I ever did.

My son bought a house at 320k recently buy with a much bigger deposit ( around 100k)
he and his partner pay 1100 a month
it’s a forever home though and they won’t have to love unless they moved city

They aren’t on particularly high wages but like you they aren’t planning any kids at all

Tp rent the same style house would easily be around 1800 a month

They overpay by 100 a month and they have a five year fix

They have been lucky though as I bought them pretty much everything they needed to furnish the house so they haven’t had that expense
but the house hasn’t needed any work doing to it

I’d go for the 5 year fixed if it’s 200 per month cheaper as this is a significant difference. That’s €4800 over two years saved compared to the €1600 per month mortgage. If you wanted to move to a cheaper mortgage provider after a couple of years your mortgage provider will charge a fee to break the fixed term rate. This is usually a few hundred but you could check what this fee currently is now. There are mortgage providers that offer cash back if you switch your mortgage to them, this could offset the breakage fee when the time comes (assuming you are happy with the new mortgage terms such as interest rate etc)

@helptodecide with the election, war in Ukraine and other things I’d take the 5 yr deal and rest easy knowing you won’t get any nasty shocks. Check the early redemption penalties (eg ours we can overpay upto 10% of mortgage value per year, any more and we hit the penalties. But at 5yr and 1 day we have no more penalties. Save any excess. But either is fine to be honest. I’m assuming it’s a repayment mortgage (paying off the money borrowed and interest, not interest only?)

I would go for the 5 year fix too. I fixed for 5 years last year because I wanted the security. Interest rates won't necessarily drop hugely in the next 2 years.

Normally the benchmark is one third of income on housing so bang on in your case. What are the rates for fixing on 5 years?

I don't think we are ever going to see rates as low as they were. They were kept artificially low for a long time and one of the primary reasons for high inflation. I would fix for 5 so you know what you will be paying for the next 5 years especially if it means a £2400 saving per year.

It sounds tight to me tbh, we have a larger income and smaller mortgage (although larger car payments I suspect) so on paper more disposable income but we still need to be careful if we want to go on holiday etc. You need to draw up a proper budget with all outgoings (and a generous estimate). Do you both have critical illness cover? Do you have pets? Pet insurance? Internet, Netflix, Amazon Prime, Spotify, Disney Plus, gym memberships, any other subscriptions need to be accounted for because they seriously add up.

However, I do appreciate that it's probably your best option in the long term, and I paid a £500 mortgage on a £1500 income when I bought my first flat so it's doable if you live on a budget (which at your age you're probably used to). I guess I'm saying don't overstretch yourself to the point you can't travel or enjoy yourselves at all, you don't get your 20s back. The 40 year term also makes me balk, but you can overpay/shorten that in future when you remortgage. I'd also go for 5 years as I'd want the security of knowing our payments won't go up in two years. Yes rates might drop, but you don't know.

Well nobody's likely to be going for a 10 year fix now, but we fixed just before Truss tanked the economy and I'm sitting here relieved I know what my payments will be for the next 8+ years. I won't know if it was the right decision until that time passes, but the peace of mind is worth it regardless.

Have you checked on money saving expert mortgage comparison if you can get a better deal? Just having a quick look with the information you provided and you can get a 2 year fix with Scottish building society for 5.39% so £1550 a month plus lots more options for below the rate you quoted.

I think a 2 year fix is a massive gamble. Interest rates could easily go up. If you can currently afford the repayments on a five year fix (which would be £1469, again with Scottish building society) your salaries should hopefully only go up so this will become more and more affordable. At least you know where you stand with a five year.

Snap! 10 year fix at 2.1% with no fee and we can port. I certainly don't feel stupid.

This. I think it's naive to take a higher rate and hope rates decrease - I think the world is so bonkers and with Trump etc shows no sign of calming down soon so we're fixing for 5 years at 4.32%. Rates have been 8-15% in the past and if you're young you forget that the 0-1% days were the exception and not the rule I'm afraid.

You're a vet and he's a HGV driver but your combined income is only £4500? You should be earning that alone as a vet!

Well that's nonsense https://thevetservice.com/how-much-do-vets-earn-on-average-in-the-uk/. OP has already clarified her salary and that's she's newly qualified (fairly obvious as she's 24).

I don't think a lot of people realise vets are salaried and don't personally see any of the £100 for dog eyedrops etc. That goes to the partners or the corporate entities that own a chain of surgeries!