To think we can manage this mortgage

[Whistlere]

House: 490k
Mortgage: 290k - 5 yr fixed at 3.86%
Net pay: 3400 per month
Mortgage monthly repayment: 1500

Savings: 90k
ISA stocks and shares: £60k

Looking to overpay the mortgage by 10% a year.

Early 40s with 2 kids in primary school.

I know it’s not sensible but I think it’s manageable, although I am worried what will happen if one of us loses their job.

You mean net pay

Yes, I did. Good spot. Apologies

OP, how much are you inputting into your pension that you can stop if needed?
That may change opinions if it's a sizeable amount.

An offset mortgage is just a mortgage that's paired up with a savings account -, you get no interest on your savings but you don't pay mortgage interest on the proportion of your mortgage that matches your savings. It's not interest only or investment linked.

I guess it all depends whether you can cover all your bills and living expenses with £1900 a month. For us, that would be very easy, but we don't have children or any of the associated costs to worry about.

Once you factor in all your bills, petrol, food, childcare costs and other spends, will that leave you enough to not be stressing each month?

Another question can you afford a rate increase. When we took our first mortgage out interest rates where 5%. That is not unusual, they have been extremely low recently. We where able to cope with the recent interest rate increases without a problem, but it did add another £500 to our monthly mortgage payments at the worst. Could you afford that?

I think it’s fine as you have loads of savings/ investments.
As long as your jobs are pretty secure and your savings can be accessed quickly if they are needed.
Lolling a bit at the idea that four people would struggle to live on 2 k a month after the mortgage is paid. Plenty of people do it, and on less.
With an interest rate that low, as long as your investments are not high risk, and your savings interest rate is more than 3.86 it wouldn’t make financial sense to use up your saving on a bigger deposit.
MN is very very anti debt and risk averse on the whole though.

You must be overpaying into pensions quite significantly to have been approved for that mortgage, so presumably you could stop doing that if £1,900/month wasn't enough to live on. Or you could access some of your savings, maybe for things like holidays and birthdays, if the pension overpayments are a better investment than the £90k in cash.

We are a family of four as well and £1,900 would pretty much cover us for bills, groceries, car finance, travel and after school club, but wouldn't leave us with much over for fun stuff or one-off expenses. Obviously every household is different, so just look at what you spend now and work out if you can make it work.

As soon as you can do so without penalty when you've moved, pay the 10% overpayment at the earliest opportunity (is that the maximum overpayment?) and do that for 3 years to build more equity and either reduce your term or payments according to how you're managing financially. Your husband was wrong about the best way to do this, so do factor that in for future financial decision-making. It sounds like you've been doing quite a bit of additional investing, but not in a very well-planned way for your lifestage and situation. It sounds like you will manage the mortgage but will need to be more careful about spending and saving.

I would absolutely put 90k into the mortgage. I doubt it's too late to do it. Call your mortgage company. I think it sounds tight to me. Not sure you'll be living comfortably but maybe you are very frugal? We pay 1.5k on a 5k take home and I wouldn't want it to be anymore.

Honestly, no, but we are fixed for 5 years and are hoping to overpay as much as possible.

We overstretched on our mortgage 8 years ago. Biggest mistake we ever made. We’re stuck with it now, and for various reasons it would be a disaster to move. Really regret it though and have spent most of the last 8 years wishing we could have a do over and make a different decision.

I think it's a stretch. I am assuming it's a bigger house and that comes with bigger costs (electric to heat, higher band for council tax).

You also say you would worry if one of you lost your job. What industries do you work in? Is this likely? If it did happen would it be easy to secure another job?

What rate are you getting on the savings? Assume quite a bit higher than the mortgage rate? Not the stocks and shares obviously leave that as they are long term.

That sounds like a huge stretch OP. Have you been living frugally before buying this house?

We are looking to upsize and have been putting the extra to a larger mortgage payment away for 8 months to see how we'll fair before we decide to buy. I definitely would not want your size mortgage on your take home.

Seems tight. How much money will you have left a month after council tax, electric&gas, water, broadband, mobiles, home & contents insurance, car insurance, car tax, travel to work, childcare? Maybe doable if you both WFH and have no childcare costs, cheap food shop, no pets and free hobbies!

Well that’s a risk. But if worse comes to worse you can sell up and move at the end of the 5 years and you’ll have a better chance of more growth on a property with more borrowing. No right answer, but I’d be tempted to go for it.

I agree. Similar here and wouldn’t want to be paying more on a mortgage.

Well, your money left over after the mortgage every month is more than my current salary after tax deductions, etc. I manage with kids, so I’d definitely say it’s more than survivable. Nevertheless, I wouldn’t want to be in any situation long-term which would impact my overall disposable income. I think it comes down to personal preference and what is important to you as a family.

Having said that, you have a massive amount in savings. Wouldn’t it make more financial sense to put that into the house and reduce your overall mortgage cost? You reduce any early repayment penalties and the amount you’ll spend on interest, plus your savings are wrapped up in the equity of your house then (which typically is a safe way to invest/protect your money).

Can you actually afford to overpay and pay all your bills and living expenses on £1900 a month? Or are you going to be dipping into your savings?

It's not just the mortgage, it's the presumably significantly increased bills for a property in that price bracket.

I overpaid my mortgage to that level on a similar income which was okay but I wasn't taking on a bigger property with higher council tax, utilities and maintenance at the same time.

Plus everything has become more expensive. I could do it again but I'm not sure I'd want to commit to 25 years of it.

If one of you did lose your jobs your savings could replace their income for a couple of years - hopefully they would have a new job way before that.

Do you have life insurance? You could do with enough life insurance to pay off the mortgage if one of you died.

Do you need a mortgage of this size to get a reasonable house for your family e.g. in London you might need to spend that much for a modest house but in some other places it might be quite a large property. I guess I ask as it is going to be harder for you to support teenagers that want to go on school trips abroad, learn to drive, go to uni etc etc than it would be with a cheaper property. Although a nice house is lovely there are a lot of other things that your kids would like you to help with if possible. Your savings are great but you might find you need to dip in to them to manage and, of course job loss or illness could deplete them.

In which case I wouldn't, we had a 5 year fixed when we bought ours, but new we could afford a rate increase. Bearing in mind we had like 1.5% interest rate, but knowing that rates can increase as like I said our first mortgage was 5%. We didn't think it would actually happen but it did and we where glad we knew we could cope and not panic about it.

The problem is if you don't have the ability to shop around after 5 years you could get stuck on a higher then market interest rate. Do you see your income going up at all in that time?

Ok so going slightly against the grain, I think it’s fine because you have so many options if you start to find things tight. And I think they will be with that level of income.

However you can simply pay less into your pensions or use savings. I understand that your DH is thinking he can get better rates of return on these than the mortgage rate and that is savvy thinking, it’s not always better to have a smaller mortgage. Worst comes to worst you can always move money around. I’d do it.

You need to do a proper budget, what will your new outgoings be? Is there a comfortable amount left to live your life?

What are your savings and investments for? Is it towards retirement, are you in an insecure job, saving for wedding or travel, new cars, house renovation, uni fees, etc? Is your savings rate higher than your mortgage rate?

I personally think that would be fine but it depends on your lifestyle. You could pay the mortgage for years out if savings if necessary.

It's tight but doable with a sensible budget.

And do not use your savings or otherwise overpay your mortgage if you are getting a better rate on your savings than the cost of your mortgage as you will earn more in interest than you will save on overpaying.