To go for the highest mortgage offered?

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Hi all,

DH and I have been getting our house ready to sell in the next few months we’ve been here for over ten years and now with two children we need something bigger.

I’ve been keeping an eye out on what goes on the market and the price I thought we’d be able to afford.
I’ve done a few mortgage calculators now though and they are estimating that we could borrow quite a bit more. With the current interest rate fixes it looks like we would pay £300 more a month to do this - we’d up our years as we don’t have that many left currently and I’ve also gone back to almost full time so we’ve not gotten used to the extra money yet really.

I do remember when using those calculators years ago that our mortgage in principle was a little less though so I’m bearing that in mind.

So AINBU to go for a more expensive house and maybe take on the highest mortgage offered?

Or AIBU and it will stretch us too far and be a horrible stress?

So AINBU to go for a more expensive house and maybe take on the highest mortgage offered?
Or AIBU and it will stretch us too far and be a horrible stress?

How do you expect anyone to answer that without any financial information?

I would always go for the biggest mortgage you could afford because you get the benefit of a nicer / bigger home and you get the benefit of more exposure to the property market (which has historically been a good thing). That's very much my personality though, I quite 'ambitious' when it comes to property (which has so far worked out very well) but I fly closer to the wind than lots of people would want to so it's very much a personal choice.

Personally I wouldn’t, not with interest rates the way they are at this point in time. We had multiple neighbours who did that and had to sell at re-fixing time because what had been a stretch on their original interest rate was now completely unaffordable with the new one.

Not worth the risk, and honestly, live a little with your money instead. Choose a house you can comfortable afford and use the extra for fun, farms, holidays, camping, trips away, theme parks… life is for living.

It depends. If you live in London and need to borrow the max just to get something siitable then you'll have to do that. If you live elsewhere where you can buy what you need for less than the max you can borrow do that and invest the difference in your payments in your pension or S&S.

My PILs have a gorgeous big house in an expensive city but it's a struggle for them in retirement to maintain it and they don't have accessible savings, but they won't move because they want us to inherit, never mind that their children will all be in their 60s by the time they die and there will be IHT to pay. My parents have similar value of assets but they aren't all locked in their property, they downsized and have a modern house in a beautiful location and have money to spend and have started gifting to reduce IHT. We've followed my parents and did not overextend ourselves on our mortgage and so have good savings and a nice standard of living.

From my own experience, no I wouldn't do it. We were offered £100k more than we ended up borrowing. I will be thankful for the rest of my life that we didn't take it for the sake of it. We would've been crippled beyond belief when mortgage rates went up.

If you think it would enable you to jump a step on the property ladder and all the associated costs of a move, legal, stamp duty, EA charges, then I think it could be considered financially prudent, providing you don’t overstretch yourselves with the mortgage costs.

Like @Icanttakethisanymore I’ve always gone for the biggest mortgage I can afford and taken the risk on pay rises making it more affordable and house prices rising so LTV ration improves for remortgaging. Then my house is not only the home I want now but also a nest egg for the future. But only you will know how risk adverse you are and how much disposable income that will leave you with.

I think this depends on your personal situation. We could have gotten a much bigger mortgage but felt it was a risk so didn't. I was made redundant this year, 2 years into our mortgage, and my first thought was how relieved I was we hadn't taken on a bigger mortgage. Especially with how interest rates have gone.

You are thinking about it the wrong way.

Work out what the most that you could afford is and feel happy about committing to, and then set that as the top of your budget when searching for houses. What that amount is will depend on your incomes obviously, but also your attitute to risk, how safe your jobs are etc.

And then pick the house you like the best within that budget. If that is under your top line amount, that's a bonus.

No one can tell you. Some people have always dreamed of a big house and are willing to stretch themselves to get it. Others crave the security of not owing anything to anyone. If we live somewhere more modest, we can pay off the mortgage earlier, then put more into our pension, and build up a pot to help DC with university expenses and a deposit, which will have a bigger impact on their quality of life in future than whether we had an extra spare room and a bigger garden when they were growing up. But those are very individual choices and vary widely with circumstances.

Best to speak to a proper broker, the online calculators are rubbish and lots very inaccurate because of interest rate changes. Our broker found us deals at over 1% lower interest than one of the big-name calculators.

ultimately the bank will assess your affordability prior to giving you and offer (remember a decision in principle isn’t credit scored and is just based on soft facts) the bank will asses your security (house) and your circumstances (affordability), they will stress test it (5 year stress tends to be your initial interest rate, 2 year more discretion is used)and make an offer that they’re confident you can pay back, they don’t want you defaulting on that loan. So if the bank thinks you can afford it, you probably can (major like crisis aside)

Also go for a fee free broker, they are already getting paid by the lender.

and keep in mind when your fix ends you can product transfer without your loan being re underwritten and a lot of brokers don’t have the PT rates

We have always gone for much less than we have been offered but it has always been enough to find a house that meets our current requirements plus some growth. Our first house was a 3 bed semi. We got it with no children but it would accommodate a child's room as well as a spare room so it allowed us to start our family.
When we moved due to my partner job relocating we jumped to a 4 bed detached which meets all of our needs plus option to expand our family, in an area we like. We could easily live in this house happily for 10-15+ years. We will probably move again when we start thinking about winding down work to somewhere more rural when we don't have to factor in commuting into our requirements.

We have always prioritised being able to fund our lifestyle on one salary as my partners job was precarious until recently as his in an industry where you move from short term contract to short term contract. As it happened it turned out my job was the problem and I was made redundant in Feb. It has been a huge comfort to know that the bills are all sorted and I can take my time job hunting, I work in a niche area so it can take time to find employment.

I would look at what you can borrow, what monthly repayments you can afford, pressure test your finances in case of the costs start spiralling again, what would happen if there were issues with employment. Then start looking at how far your money would go and what your needs would be to meet your requirements now and over the next 5-10 years. Trying to find the balance between stretching your budget to get a house that will grow with you in an area you want to stay in with not stretching yourself so far that you can't enjoy it because of fears of it all crashing down. It's costly to move so you want to minimise the risk of having to move because you have been too cautious and not stretched your budget enough to cover growth whilst also having to move because circumstances change and it's no longer affordable.

You can always take the risk away with a long term fixed rate. Don't believe anyone who tells you that we will see very low rate interest rates again for the foreseeable.

We have a 10yr fix to 2032 and if the rates are high at that point this will be heavily offset by the significant reduction in outstanding capital

No one can tell you what rates are going to be, trying to predict swaps is a fools errand but what you can know is this year the Bank of England will likely cut the base rate another two times, so you’ll likely see swaps go down a bit and rates to come down.

beyond that who knows

(for clarity mortgages aren’t priced on the base rate so the base rate is largely arbitrary unless you’re on a product that tracks the base rate)

First, I’d speak to a mortgage advisor about what sort of mortgage you could actually get. I didn’t find the online calculators very accurate at all. For example, our lender offered us a mortgage up to £200k (!!) more than the online calculators said we could get. Not that we would have taken on such a large mortgage, but it was shocking how different the figures were. The interest rate through the mortgage advisor was also significantly lower than anything I could find on my own.

Once you know what you can get, then think about your affordability. I’m definitely a fan of stretching yourself. We did and we have a beautiful house that has been a great investment. But I think I’d be careful about going to your very limit if the margin is only £300 per month. I had a bloody mouse eat through a wire in my car and cause £4000 worth of damage. I ended up putting the repairs on a service plan that then cost me an extra £350 a month for a year. It was fine, paid off in the end, and I wasn’t on my ass, but if the margins had been more slim, big car repairs or a new boiler would have been a lot more stressful.

What does it mean to you?

The house is the exciting thing now, but in 5 years, if you can't afford other things, it might feel like a slog.

Where do you think the market is going? My concern is that there are so many government plans to throw up new homes that house prices will decrease, which is obviously great for some, not so great for others.

We went for an affordable 3 bed and overpaid the mortgage. Many friend have gone for 4 beds.

We are close to paying ours off in our early 40s, even having taken multiple trips abroad, and are really looking forward to being able to do stuff like Disney World and other long haul that would typically be once-in-a-lifetime.

Many of our friends have struggled to take UK breaks in half term.

There isn't a right choice, their houses will obviously be worth more, but our lives are currently significantly easier because we used the spare money to overpay first and we could easily afford a 4 bed now, which was unaffordable for us at the time.

Thanks all - lots to think about.
We’ve been so careful the last 5 years after having 2 under 2, nursery fees, me very part time, covid, DH taking redundancy and a lower paid job (which has meant I can progress my career). So I’m ridiculously cautious now but also know we need a bigger house and we can afford one - it’s just knowing how much to increase!
We have a 3 bed terraced in the best area so have a lot of equity after ten years as we’re also in the SE.
Got just over ten years on this mortgage and 100k left and we’re now saving over £1000 a month whilst still having luxuries.
After penny pinching during the tough times I don’t know how to decide.
We thought upping the years on the mortgage would make it less scary (I know we’d pay more interest but then we’d also only pay a couple of hundred more a month and still have 1k to save).

Are you now bound by school holidays? Because that puts the costs for a holiday up loads 🫣

If the kids aren't yet in school, is your current place well located for catchment?

Have you had a big declutter?

I know none of this solves it 🤣 but in your shoes, I'd be thinking about maybe staying put and cashing in on higher rates of interest in the money you have in the bank and then work out realistically where you want to move, what holidays you want and go from there. You def didn't have to buy the biggest you can afford. Have you seen any that you like on rightmove? Are they in budget? Over? Under?

Good luck, this stuff is so tricky!

@CheesePlantBoxes
thanks for the advice.
We have always been tied to the school hols as I’m a teacher so it doesn’t change anything for us there - however we do want to make sure we can afford a holiday each year (barring if something needs to be done on the house as we’d happily forgo it and go camping then).

They’re in school and sorted and if anything we might move a bit closer as would like them to ride to secondary in a few years and at the moment they could but be nice to be a little closer possibly (although not our top priority).

Yes we’ve decluttered (other than our bedroom which always seems to be left until last). It’s a lovely little house but I’d like youngest to have a slightly bigger room, slightly bigger garden and either a bigger kitchen or an extra reception room so we can have a space to socialise more with kids around too!

We definitely are going to move. Yeah rightmove does have some that I thought would be in budget although always a compromise on something but now we might be able to borrow more I’m wondering what to do.

It sounds like you're in a really good position :D

Can you book any viewings? Even just one or two to get a sense of the extra space at different budgets. Perhaps even a newbuild, even if it's not your thing, f you dont want to bother anyone, just to get a real feel what different budgets/square footage you will get for the price? It might help you work out if spending the top of your budget is a want or a need.

But definitely budget for the holidays you want within that decision. I'm the world's worst for thinking I won't mind going without something and then thinking about it every day 😆

Depends if you can afford the repayments 🤷‍♀️

At the moment, definitely not.