To think we CAN live on the mortgage

[JaneEyre40]

Advice please -

Couple - Earn £10,500 a month
Mortgage - 3,700 a month
Nursery - 1,000 a month

Considering all other possible outgoings, do you think we can afford this and not feel pressured each month. What am I not considering? We've done the spreadsheet but I'm still unsure.

We will have about £65,000 in savings at the beginning of this venture.

Thanks in advance. House of a lifetime.

Wow sorry you’re getting a hard time, so odd. Anyway we earn about that but older than you (age 46) with older kids about to go uni. I’m wondering if it’s worth having to budget hard to live in a bigger/better house or not… I think it’s personal and depends if you want to spend time at home or out and about out, holidays, restaurants etc. I would say if it’s your dream house then go for it. You sound like you are happy to stay at home with the baby at this point in your life and enjoy it. Also your wages will potentially go up so maybe you’ll have more disposable income in a few years…
oh don’t forget to check the schools before you buy it!

We are a few years older than you, although had our only child at a similar age to you.

Our situation was different as we were lucky enough to buy when interest rates were low and we bought a decade younger, but otherwise, it wasn’t that dissimilar.

My thoughts are

1. have you considered an offset mortgage (do they still exist?). The positive balances in your accounts offset the debt in the mortgage, so you are accruing less interest on the debt than you would do otherwise.

This should work well as you are have bonuses, so large lump sums coming in to offset against the debt.

Given your salaries, you are both higher rate tax payers and subject to tapering of your personal allowance. Unless you are putting your money into stocks/shares/bonds, you will earn less in net interest on savings than you would ‘save’ in terms of the interest on the mortgage debt.

2. What is the longevity of your partner’s career? In my husband’s line of work, they don’t tend to last beyond 55, and it may be more difficult to get a similar job the older you get. So the income you are enjoying now may not necessarily last the lifetime of your mortgage.

That’s the only think that makes me potentially a bit nervous about your mortgage situation. Taking a 35 year mortgage at the age of 40 and 45 suggests that you are still planning to be paying it off aged 75 and 80. Do you have other income streams that will still be active at that point? Are you intending to pay the final installments from your pensions? If you are in teaching, is yours a public sector pension?

I would recommend that you have the ability to overpay the mortgage without significant penalties when you have periods when your incoming comfortably exceeds your outgoings.

3. Perhaps contradicting myself on the above, I wish I had appreciated the power of compound interest earlier. We waited until we had no more debt in our mortgage before opening ISAs. I wish we had done this earlier, at a stage where we still had interest to pay, but the amount was small.

4. I never thought I would consider private education for my child. I was state educated. I refuse to do private work now.

However, it is coming up to the time that you start thinking about secondary school, and potentially, my principles may bend as I can see how our local independent school might fit my child’s needs better than the alternative state options.

One of you could lose your job. I've been made redundant 3 times now in 3 years. It's scary and my mortgage is only £450/mth.

Also, your mortgage could go up at the end of the fixed term. I had a 5yr fixed term and it went up a lot once the 5yrs ended.

Go through a whole year's worth of bank statements and credit card bills and put everything into a spreadsheet to see your true outgoings per month/per year. I put everything into categories in a spreadsheet. Don't forget once-a-year costs like insurances. Then add on some inflation e.g. for petrol/food/insurance/nursery fees etc each year.

If you live on beans on toast you should just about survive. 😜

If you put in a larger house deposit using a good chunk of your savings, your mortgage will be less per month and less overall.

£5000/month/person really isn’t that unusual for a white collar professional especially in London and it doesn’t go as far as people think it would even if there are two earning that amount.

I don't understand how people earning so much money, who are getting a mortgage so have had a conversation with - at the least - a mortgage advisor, need other opinions on whether £6k is enough to live on.

Get a bloody grip of yourself.

We had to make a similar decision to you a few years back (only about 60% of your income though <checks small ads for bar work>)

Dream house but a big project - only way we could afford to live where we do, but more than doubling our mortgage. We are on a very very good lifetime mortgage tracker rate due to a stupid amount of good luck and great timing a few years previously but as it was a tracker calculated what it would cost in a worst case scenario of the base rate going up.

We knew we could afford it up to the base rate going to about 8% although may have to give up some luxuries - it certainly got a bit nerve wracking for a few months when the rates kept increasing - the monthly payments are 60% higher than they were when we bought.

The mortgage is an offset one, so any money we save within the linked pot, we don't pay interest on - but crucially its still accessible if needed. It can work out better than a normal savings account and has similar benefits to an ISA in terms of not paying tax on the interest - but without the limits!

Some PP said it was more than a third of your income - but its only 35% and if you otherwise don't have a lot of expenses you should be fine.

Go for it - dream houses are exciting!

I am baffled by this thread. £100k salary is definitely not unusual in the SE. We should be celebrating women's successes.

Also I am amazed that people can't see how easily the money goes. Mortgage in SE, plus childcare, bills, food, car, transport etc quickly adds up. Our basic outgoings just to house (2k), feed/bills (£1k) and cover childcare (2k) to be able to work with young children is £5k. By the time we add on car, train costs, kid's clubs, clothes, weekend activities (nothing fancy), house maintenance we're at almost £7k. Any holidays/treats/extras/birthdays etc are then on top of that. State primary, but we are considering private secondary for our eldest. At £3k a month it's really too tight, so it's likely not an option for us. £10-11k a month is a very privileged position, of course, but we are leading lives within the range of "normal" with 1 car, state schools, nothing designer, normal holidays etc.

Looks like you've had some good advice - so just summarising mostly BUT if anyone mentioned the impact of pensions I've missed it.

1. You can ask current owners what their outgoings are to help you budget and it's also useful to have details of current energy suppliers/ broadband providers
2. life insurance and critical illness protection are vital. You can get term life cover and that may be quite reasonable. Check what your pensions would provide as death benefits. A public sector death benefit would, if you were married, reduce the insurance cover you'd need.
3. Get married. While children would get some death benefit from pensions unmarried couples may get nothing. A piece of paper from a registry office costs substantially less than the benefits. Have a fancy party later if you want.
4. Go through your bank statements and check how much has gone into savings each month. If that is less than the anticipated increase in mortgage and housing related costs then you have a problem. You may still be able to manage but not easily and not if interest rates rise - so consider a fixed rate mortgage at least until you drop nursery costs.

Might be worth getting a financial advisor to look at what you could insure against/what your work offers etc. eg life insurance to pay off the mortgage and insurance for loss of income - job insecurity or ill health. I ended up having to stop working for medical reasons - we'd have been screwed f my firm hadn't got a very generous income replacement scheme (designed for the older partners getting heart problems but actually claimed on by the younger women getting PND...)

We are London zone 2 with a slightly higher take home.

Honestly, it’s not enough. We dip into savings to cover school fees (you won’t have these), house repairs/ improvements, holidays, and other big “one off” expenses like annual insurances, financial advisor bills, fees relating to our other property (let out), etc etc lots I can’t think of right now. This is fine for us because DH receives a hefty annual bonus. Without that, it wouldn’t work. So I guess my advice is to budget up very carefully and think about all the potential expenses you will or MAY have. Ideally you want to be putting away money into savings every month (or year, in our case!).

I don’t blame you for signing off!
But if you read this, I’d like to say, I’d go for it! You both work hard and earn well. If you can’t live well, then what’s the point. Work hard, play hard. You have a bloody good inheritance. I feel you’re a little over thinking……. If you have to lose a holiday in-the first few years… so what! You’ll be in the house of your dreams
You have an awesome inheritance, don’t worry you’re fine.
I have a feeling @JaneEyre40 is that you’re really risk adverse.
Enjoy life, it’s short, or there’s no point!

@Switcher Why?? If you can’t live on £5k a month after mortgage and childcare you’re doing something wrong. For context, my DS earns £30K a year. He takes home just over £2k a month, and his mortgage is just over £1K (he lives alone). He’s left with £1K a month for bills, food etc and he still goes out, runs a car and pays for a season ticket to a premier league club. But he doesn’t live in London, he lives in the real world.

hi Seems affordable today per your income but how stable are your jobs and what contingency plans do you have if one of you loses their job or becomes ill or worse? people don't like to think of these scenarios but they need thinking of especially with such a huge mortgage. have you looked at the cost of life insurance for one or both of you? Mortgage payment protection? Income protection? they will cost an arm and a leg to cover a mortgage that large. Can you afford the monthly premiums? Will the mortgage be paid off before one or both of you retires? would your pension cover it? Presumably its a large house - have you factored in council tax, water bill, energy costs per month?

if doesn't look from your list of costs whether all that is accounted for?

Its not always about being able to afford something today!

I don't blame you for signing off either. Some people are very strange when it comes to how much people earn, especially when it's more than they do.
I will probably be told off for not 'reading the room' but 10k / month joined income in London is not a huge amount, given how much everything costs here.
OP - you will be fine, just plan ahead and make sure you have savings.
✌🏼

I guess it depends how secure your jobs are...

😂😂😂

I'm laughing al all the posters who didn't realise this was a parody of another thread that's been running alongside this about not having enough money.

You've all been had by @JaneEyre40 😆

I do think that, as a good sport, you should come back just once and admit this was all a bit of fun on your behalf 😂

I did think it wasn't real. Not many men earning a decent amount of money would live off of sweet potato and veg every single day.

You've got shitty replies because you asked a stupid question as a supposedly intelligent person.

What about women earning a decent amount of money?

To be fair, I did say she was a bit late for April Fool's Day

Sorry if I missed it but I can't seem to see how long your potential mortgage term is? I'd agree it looks like you can afford those repayments now, but will you both be able to keep up the energy in 20 years' time, work just as hard/long to earn the same amounts?

I'd only consider losing that ratio of my salary to mortgage repayments if it meant I could pay the whole thing off in 15 years or less. No way would I work in a busy high-stress job for 20-30 more years just to keep up with a debt.

You don't need to lie awake worrying. Rates have been coming down recently; of course they may go up again. But you shouldn't worry about having to pay off the mortgage in 15 years. You can get mortgages that go up to the age of 80 or 85 or with no upper age limit. Some could be as long as 35 or 40 years. Being in your 40s or 50s isn't a problem. It's all about affordability. You can even get a mortgage when you are already retired. You probably have some equity built up so a favourable loan to value ratio may get you a lower interest rate. Sleep tight.