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.

What do you pay now and how much do you have left over? That would give you a good indication.

Our mortgage is £1600 pcm (£490k total mortgage we have a very good rate and LTV). Our rent prior to buying was £1200. An extra £400 a month is not really a big deal. We just made some adjustments (though we earn probably double what you do). But our old house went back on the rental market at £1600 pcm and similar 3 bedroom properties easily £2000+.

It made a lot more sense to buy than rent obviously, considering the monthly cost was marginally more.

Do be mindful of the unexpected though. I’m now off work due to cancer. Sick pay carried me for 6 months, but now I’m well and truly unemployed as my contract ended. We can absolutely manage for another year or so (I’m sick enough to not be able to work, but not sick enough that critical illness cover would apply). It’s honestly not something I ever really considered when we got our mortgage, like if I’d ever be young and too sick to work. Because when you’re young and healthy, you just assume that only happens when you’re old or to other people. You have savings, so I think that builds in a safety net.

I don’t understand how you could afford to overpay with your joint income. It makes no sense to not put some of the savings towards the deposit as you have such a good amount! I imagine you will just end up dipping into savings for Christmas, Birthdays, boiler breakdown etc.

I mean it's doable.......but as someone who has an income of around 3k a month who doesn't have a mortgage anymore and doesn't run a car I'll say we aren't exactly rolling in it.

It's doable. But could become pretty miserable to sustain it long term.

Sounds like a great deal to me.
3.86% is a brilliant rate.
Can you do interest only ? I wouldn't bother overpaying that, inflation will take care of the debt and shrink it.

Sounds perfectly doable, although I would have put a bigger deposit down. In 5 years time you should be in a really good place.

We did that although bit more take home initially and only 1 kid just starting school. We also had substantial savings as a safety net. I say go for it, you have enough savings to cover shortfall or job loss. However you're on mumsnet and then some people on here who feel broke on 100k+ a year so you may get some very conservative responses. £1500 is pretty much average rent for a family sized home nowadays too, so there's plenty of people who manage that.

Having said that we felt the pinch before my husband just recently got a promotion this month and there was many a month where we overspent by a couple of hundred and had to top up with savings. Take into account extras like council tax, utilities and insurance costs that come with a bigger house.

How much do you overpay your pension and could you earn more in the future? But yeah I say go for it, enjoy your lovely house. Xx

House: 400k
Mortgage: 200k - 3yr fixed at ?
Net pay: 4280 per month
Mortgage monthly repayment: 1400
Savings: 20k
ISA stocks and shares:
2 young kids

I don’t think our situation is that different from yours. It is what it is. We live in an expensive area and it would be even more per month if we were renting, and at least we’re building some equity.

I wanted to be able to pay all our bills with one of our wages in case the other lost their job.

Why do you want to fix for 5 years when interest rates are falling?

This is a nice idea but only works if both partners have similar earning ability - for us I earn over £100k and DH around £30k, we have to take the extra risk as can't base our costs on the £30k. It would pay the mortgage and most bills but not everything at all.

I’d question the assumption that you can easily make more than 3.86% off savings. Interest rates are likely to go down this year. And stock market returns are becoming more volatile. Sure you might be able to … but do you want to take on the extra risk?

I’d also be putting at least some of the savings into the mortgage.

You can save around £40k pa tax free per person (£20k cash ISA allowance and the £1000 personal savings account allowance which is 5% interest on £20k and you'd probably struggle to get that now so it might be closer to £25k).

It looks like the OP has misrepresented their income as they save a lot which does mean they can just save less going forwards and I do agree with saving instead of overpaying a mortgage when the rate is better.

However that doesn't change the fact that £1900 for all none mortgage costs would feel very tight or even be insufficient for a lot of people, indeed I remember a few years ago that the Joseph Rowntree Foundation declared less than £1600 after housing costs as 'relative poverty' for a family of 4 so that figure is now probably more than the OPs £1900.

But it does depend on circumstances and lifestyle expectations.

How much are other bills?
Groceries?

Travel requirements - these could be almost nothing if work, school and other amenities are in walking or cycling distance or could be hundreds of pounds a month if they need to run 2 cars and/or have season tickets for commuting.

Plus obviously there's leisure, holidays, clothes, grooming, etc etc.

We don't have a mortgage any more but we always saved instead of overpaying and in nearly 3 decades never failed to beat our mortgage rate.

For a good few years we were making a profit from having a mortgage because the interest our overpayment was earning was much higher than what our mortgage cost.

There’s some bad financial advice on here, OP.

You’re close to exchange, and presumably selling a house too, so you’ve already probably around £5k spent on legal fees. This was a question to ask a few months ago, but I understand you’re probably wanting some comfort before you sign on the dotted line.

Only you can decide what is affordable for you and you do that through robust budgeting. To me, it does sound doable. You won’t have an expensive holiday annually, but c’est la vie.

If it were me, I’d think:

1. I would argue in this day and age cash flow is more important than property equity. I disagree with advice to use an ISA to pay down the loan. Your ISAs are on a higher interest rate than your mortgage so it makes sense to keep them there to grow nicely. I also disagree that equity in a property is a given, with house prices inflating and deflating by as much as 10% currently, so it feels like a bigger risk to pour cash (which next to the loan is also a relatively small amount of cash, but in the hand is not an insignificant amount) into an asset which is vulnerable to the current economic climate.
2. You have more than enough savings to tide you over for a bit if you needed a cash injection (a boiler breaks, etc).
3. Everyone worries about losing their job. We are in the same position, we need two (big) salaries to fund our mortgage and childcare fees and food bill! But we need a house and this is where the economy and our season of life is right now. If the worst happened we would just have to deal with it then. I’m very risk averse, but even I admit you can’t cater for every eventuality (at least not without more significant compromise on your quality of life!).

It sounds like you’ve thought it all through thoroughly, you’ll have contingency plans in place, and you must be good at saving already with that cash behind you. Presumably you’ve also forecast ahead five years to ascertain the loan/equity ratio and how that might affect future remortgaging and repayments (and therefore your cash flow). Of course this is crystal ball gazing, but I find it helpful nonetheless.

It sounds like you can back yourselves that, although this will be a tight squeeze with the day to day budget, it is doable and the quality of life the house will provide is worth it. But honestly no one here can tell you this other than yourselves as you are the ones with the excel spreadsheet (hopefully!).

I would use the £90k on the mortgage. Your get a lower monthly rate unless there is a reason to keep the £90k in savings?

it is doable, but at the sacrifice of your being. I’m not sure it worth that.

I wouldn't have touched that mortgage to income ratio. It's way higher than is recommended.

Appreciate you have your savings as back up but suspect you are going to need them to top up your monthly income.

Our mortgage payment is the same repayment fixed on low interest until 2032 with an income of 5.5k. While we don't feel overrly stretched, it is still a notable amount that is paid on the mortgage

What does your broker say? We have a higher income and smaller mortgage. We wouldn’t be able to borrow that much. Who is the mortgage with?

All of the £90k will be in the fixed rate isa at 4.25% - we’ll be better of by £500 a year. Not sure it’s worth doing that now

He just wants his commission - we passed the affordability checks, so he thinks it should be ok.
I think the first year will be really tough.

I honestly think buying a house and having young children is the most financially burdensome time. I have approached it with a buckle in mentally and hope it will get better as inflation erodes the ratios.

Be resourceful and savvy, you've clearly got it in you to save (unless your savings were a gift) - so you should be fine.

Your savings are too high. I’d cut your savings down to 40k (about a year’s income) and reduce the mortgage by the equivalent amount.

At the moment you’re just receiving less interest in your saving than you’re paying on your mortgage (almost certainly)

Nationwide lend up to 6 times income

Yes surely you’d get more than 5% on savings so your ok

I am single and earn 50k and passed affordability for 250k at 1700 per month!! That's insane. I don't think the affordability calcs are great...
I'd use some of the savings to reduce mortgage amount?