AIBU to give up being mortgage-free to buy our dream home?

[Dreamhome4]

We’ve been offered what feels like our dream house — it’s spacious, in a great location, and ideal for our young family. The current owners are relocating abroad and have offered it to us for £50k below market value.
Right now, we’re mortgage-free, which I know is a rare and lucky position to be in. But to buy this house, we’d need to take out a £275,000 mortgage over 35 years. Monthly payments would be £1,220. I’m currently a stay-at-home mum to our toddlers, so we’re living on one salary. After all bills, we’d have about £500 left over each month for the next two years — but we’ve also got a £20,000 emergency fund as a safety net.
In two years I’ll be going back to work, and we plan to start overpaying to bring the mortgage down.
We could wait until I’m working again to buy, but honestly I don’t think a house like this will come up again — it would give the kids so much more space to grow up in, and really feels like a forever home.
AIBU to even consider this when we’re currently mortgage-free? Or is this the kind of opportunity that’s worth stretching a bit for? No matter what, we will definitely have to move in the next five years for more space.
Would really appreciate your thoughts.

I’d want to be sure there isn’t actually anything wrong with the house, some big drawback that might prevent it selling on the open market. Otherwise why wouldn’t the vendors try to get the best price possible for it?

Also, to add about the illness, losing job etc, we would take out mortgage protection insurance.

Have you looked into this to see if you are eligible and the price, because it is great insurance to have IF you have a total clear bill of health with no exclusions but it comes at a high price monthly?

If you'll have to move within the next 5 years anyway then yes, do it now. I seem to be the only poster thinking £500 after all bills is actually a lot?!

Though are you sure you can get a mortgage that high on just your DH's wage? And for 35 years if you are 37?

It depends on what OP is classing as “bills” though, and we haven’t had that clarified.

If it’s £500 after all household bills, all food shopping, petrol/transport costs, toiletries, hair cuts, clothes/shoes, christmas/birthday/savings, then yeah £500 for fun money is fine.

But if it’s £500 after JUST the household bills are paid then suddenly £500 to feed, clothe, transport 4 people is very very tight, and 1 unexpected bill could wipe you out for months.

We had a massive mortgage back in the early 2000s (peak low interest rates) and even then it was a huge financial burden, it didnt help DH was self-employed. Like you, we thought it was a perfect house and to some exent it was.

However, we sold up after a couple of years as the mortgage was eating us alive financially. The new house (which I stiill live in 20 years later) was not as good, but it felt better having disposable income and not living in a percious position.

I have budgeted for council tax, subscriptions, food, kids activities/clubs, electricity and gas phone bills/ internet/ water.
The £500 left each month will be for more leisurely activities or to put back into savings. And we will have the £20k for anything we haven’t accounted for.
I’m not too worried about not getting a job when the kids are at school. Even if I just get a few hours a day to begin with, it will all add to the £500 a month.

It’s so hard to know what to do for the best. I really want to make the money grow for our kids future.

Clarify the £500 after bills, for realistic answers. If you are looking to move in the future, £50k below market value in a sought after area, is a no brainer. If you are also going to be in the school catchment areas you want, then go for it.

Assuming you have overestimated on bills and this includes food I would do it.

Your DC are are the age where things like clothing etc needn't be expensive. Plus you have a 20k buffer.

If I look back to my mortgage when my DC were that young it was a stretch. Now with wage increases/promotions that monthly payment is more than manageable.

Living in a house with space and that you love with young kids makes a massive difference on how you live your lives.

What does 500 a month left over actually mean?

Is that disposable income after ALL bills have been paid. If so it's not as bad as it sounds. If you haven't factored in adhoc bills such as Car MOT then it doesn't sound so wise

I’d probably go for it at your age as 275k is a small mortgage. Could you get an interest only mortgage until you go back to work?

Just to clarify on the budget - I have overestimated on things like electricity. For example I’ve budgeted £350 a month (just incase - however, I wouldn’t expect it to be that high in the summer). I’ve also put aside £200 for the kids each month, where currently we spend £100 on clubs. So I have been more precautious.
The budget includes our monthly food shop.

I haven’t however taken into account car tax, TV Licence etc. However, I imagine I’ll be able to save some of the £500 a month to put towards this. If not, the 20k is there for emergencies.

If anyone knows of any good budgeting apps, please let me know.

Friends of ours just came off their fixed rate mortgage. The new mortgage in the lowest rate available to them is about £600pm more. Shocking but it happens.

As long as you’re aware of the risks and think it’s worth it, that’s all that matters. It’s your life. Good luck with decision making, which ever one you decide it’s not irreversible.

Ad hoc bills - that’s the term! I’ve not taken into account ad hoc bills. However, I’m not too stressed about those as I imagine I’ll need 2k to cover those. Which, if I don’t save from the £500 a month, I can take out of our savings.

We really don’t live a mortgage free lifestyle at all, as we have always saved every penny left over. So saving won’t be a big surprise to us.

Am I reading this right, the mortgage would be until you are both 72? Or would you plan to pay it off earlier? No way would I plan to be paying a mortgage in my 70s.

Also I agree with a PP that bigger houses have much higher costs for c tax, utility bills, water… have you factored that in?

How does your DH feel about it? My DSis was in your position (though they did have a mortgage) but was a SAHM while BIL worked. She pushed him into buying a dream house, even though he wasn’t truly comfortable with it. He left her years later because he said he was just a cash cow, and she always wanted more than he was providing. I’d wait for a couple of years until you’re earning.

@Anonym00se we both feel the same way about it and both can’t decide what to do for the best. Financially, we are mortgage free due to me paying off our last mortgage (inheritance). So he isn’t, nor does he see himself as, ‘a cash cow’.

As someone who thought like this and went for our dream home I had underestimated so much. There were costs we hadn’t even considered. Even the bills we paid currently went up in price. Things like car insurance, home insurance etc. Yeah we could afford it all on paper but in reality we hated not having the extra cash to have ‘fun’. So as much as we lived in an amazing home we were just existing. We didn’t have a life, no more fun days out, weekends away, take aways, meals out, replacing the cars (older means more costs outgoing too) , Xmas, birthdays and even something as simple as treats from the supermarket had to be counted. We did have savings but didn’t want to use them for everyday treats so we’re kept for unexpected bills or for emergencies . There was tension as we were pretty much stuck in the house.
We ended up selling and lowering our outgoings so we could live. It was definitely nicer being able to afford the treats and being able to enjoy our lives.

The way I see it I would rather have a smaller home, but have memories with the kids than be always worrying about money and not being able to afford to make these memories.

If I was you I would either try and get back to work sooner so you have the extra income (this could make it doable) or stay where you are for now and when your back at work see how finances are at that stage and then look to move.

@sparkles02 thank you for this! Really helpful. Did you do this when you were both working, or just one person working?

Do it. Our biggest regret is that we went ‘safe’ and didn’t stretch ourselves much earlier in our marriage. Those of our friends who did ended up financially ahead as years went by.

Wages usually rise, interest rates are set to fall, you will get a second income. And if things go horribly wrong, you have a more expensive house to sell.

I am quite risk averse, but the risk here seems minimal to me in the long run.

You don't want a mortgage till you are 72 redo calculations based on 20 or 25 years max if that's not affordable don't do it. Surely an extra 100 000 would give you the extra space you need over current house. To be bones would never stretch myself that far to mean still paying off mortgage post retirement. I would aim to have paid off mortgage a good 5 years before retirement so some flexibility to go part time if necessary

£20K isn’t grand for emergencies if there’s only your hubby working and only £500 spare per month.
so what would happen if you need a new car? A new boiler? New kitchen? New bathroom?
it isn’t cheap!
Our ensuite cost us £6500. You would be paying that for years!

I'm a year younger than you and had a mortgage for 12 years. We borrowed way under than what we were allowed. Interest rates have gone up. We’ve hand a single storey extension, needed a new kitchen etc. Our bathroom needs updated and hoping our boiler will last a little longer.
I don’t know how we would have coped if we took out a bigger mortgage (it’s due to be paid off by the time we’re 55)

what about things like holidays? Etc

We were both working so was based on what our income was at that time (2 salaries) . Your situation is a bit different as you’re currently not working but hope to be in the future.

Remember too even if you go back to work now or in 2 years you have to factor in child care costs too (which isn’t cheap) unless you have family close by to help out. After school care, holidays etc.

Absolutely not....stay mortgage free

Is this a parent selling it to you cheaply? And therefore no massive unknowns about the property?

If so I'd definitely consider it seriously.
£500 expendable income plus £20k in the bank is tight but doable for 2 years, and results in a great house for years to come.

But as PP have said, are you sure the bank will lend to you?
I'd be inclined to consider interest only for those 2 years to keep repayments as low as possible while you're not working.

Worst case scenario, you don't cope and sell the house at full market value.
Is there any expectation that you'd split the cash if that were to happen? I.e. is it a parent selling to you cheaply as a 'gift'?