To not want to borrow maximum amount? Mortgage with DP

[LuDa4]

Can I ask for views on this please.

DP and I
Mid 30’s
1DC, not having more
Joint earnings - c.£65k
Joint monthly take home - c.£4200
No other debts or car payments etc
Deposit a c.£150,000

We can borrow up to £380,000 but would look at needing £250k which would mean a monthly Mortgage payment in the region of £1300-1400.

DP thinks we should push ourselves and get as good a house as possible within the budget.

I am more cautious and think we should leave some breathing space and be a bit more cautious.

He says the banks won’t lend us what we can’t afford.

After mortgage/bills, I think we will have around £2000 left each month not accounting for food.

Any thoughts on what we should do?

If we had mortgaged what the banks would have lent us, we would have lost our house as we had to remortgage during the Liz Truss mess!

There is an inner calm about having money left over every month. We can do bits to the house and go on holiday without having to stress!

I now advise all my friends not to max out! You never know what’s around the corner.

It’s a difficult position and I’m in a similar dilemma. I’m my area at the moment, the jump up to the next level in property is huge. There’s a part of me that regrets not doing it sooner, but then I love having the freedom to travel and not worry about money.

if you can get a house you can see yourself living in for the next 10 plus years I think it’s worth it. Climbing the ladder these days just feels too expensive.

My advice would be to go for a house with a mortgage you can afford on 1 income.

Nobody ever plans to be made redundant or struck down with a long term illness but it's a very real life scenario.
We've had both of those scenarios occur in the last 12 years and I'm very glad we had a mortgage and monthly bills affordable on one wage when they did!

Also if you want children then factoring in a 1.5-2k nursery bill will very easily eat up all of that extra you currently have.

I think it depends on your future plans- do you intend to have children / need to pay nursery costs/ will your income reduce etc. if you buy a house that needs work it’ll take you a long time to afford it if you’re paying a large proportion of your wages on the mortgage. Also are your pensions in order? A lot of people get to 40 then start paying hard into pensions so that will reduce your take home pay too

Thanks to those above who mentioned children - edited to say we have one DC

I nearly lost my house due to the Liz Truss incident. You need to give yourselves wiggle room - plan for if one of you loses your job, if you had a higher combined wage you could take more of a risk (although maxing out is still so risk due to aforementioned political impacts) but you arent on a massively high combined wage so it would hit harder if one of you was out of work for a bit.

We got a mortgage for the absolute maximum we could, but we were both on an upward trajectory with our careers and knew it wouldn’t be tight for long. Are you both at the top of your game career wise?

I think it depends on your area and the difference in house between max budget and wiggle room. Eg I’d push the budget to get a house over a flat for instance. If it’s just a more impressive house or a 4 bed rather than 3 bed, I’d stick with a lower cost wiggle room house.

we didn’t max out and bought a fixer upper that we were able to remortgage for a kitchen extension and loft conversion .. which came 2 and 4 years after the initial buy

That is a hefty deposit. Whose money is that?

I think it depends on what your future prospects look like. When I bought my house my DP was newly qualified and I was in an entry level job. We knew that we wouldn't be on those salaries forever and so we maxed out our borrowing - but we kind of had to in order to buy a house over a flat.

I don't regret it but I wouldn't max out my borrowing now, nearly 10 years later with 2 children and not much salary growth on the horizon unless I want to sell my soul and work 18 hour days.

You’ll sleep easier at night if you could manage the mortgage on one salary.

Think about your wider lifestyle too. Is your life mostly based in the house (WFH, family time, having friends for dinner, hosting visiting relatives)? Or are you out and about as a family, enjoy holidays and so on? If the former, maybe the bigger/better house will be worth it, if the latter, just get what you need for you and your DC and enjoy a bit more disposable income.

My husband and I previously bought a house that was much cheaper than we could afford. I can tell you my personal experience

Advantages:
More disposable income
Never worrying about money
Building good savings
Mortgage now almost paid off
There’s a sense of freedom knowing if one of us was out of work, we’d be financially ok

Disadvantages;
I would like more space, buying cheaper for us meant buying smaller as we wanted a decent area and a modern house.
When we retire, we won’t have the option to downsize and have some equity for retirement (although some of that offset by how much extra we can save)

I guess it's a personal preference but I wouldn't stretch myself to the max. I am currently borrowing about half of what I could theoretically with the view to pay it off in, hopefully, 7 years I stead of 24. Should I not be able to do that, I have a very comfortable monthly payment. I am also leaving a substantial sum of money in the savings account (although this is mostly because 95 days notice account will likely release the money well after completion, otherwise I'd put half of it into deposit and borrow even less).
Even if I lose my job tomorrow, I will likely be able to keep going for at least five years with a combination of income protection insurance and savings.

My wife and I recently bought OP and we earn slightly more than you and do not have a child. We are slightly older (late 30s/early 40s).

We also had a healthy deposit of circa £110k. No debts. We borrowed £190k over 20 years. We were absolutely not prepared to go above that because life is about more than paying a mortgage, and we also wanted to ensure that we would actually have disposable income to save and invest. Times have changed, and the likelihood of our generation being able to downsize and release equity in the future is highly unlikely, and I didn’t want to be in a position where we would be asset rich but cash poor. So our plan is to save and invest alongside paying the mortgage for those 20 years. And to also live and enjoy rather than just paying the bills.

We have one DC and earn slightly more than you, around £5000 take home. We also have 1 (& only 1) DC, 2.5yo in nursery 3 days pw. Our mortgage is a bit less than £800 a month and some months are a stretch, others less so.
No other debt, cars owned outright. One 20+ years old, one 10 years old.

We don't live a really extravagant life, but we don't have to worry about everyday expenditure like having lunch out couple of times a month, grabbing coffees, fixing things as they break, etc. We can afford to take a few holidays each year. One abroad one, then a few long weekends in a caravan or Air BnB.

We are also able to put a little aside in an ISA for our DC so that when they are older there is (some) money for a house/university, or whatever they need when they get there.

I guess it therefore depends how you prioritise. A nicer house or a nicer, less stressful life. We went with life, and although I would love to be able to have a bigger house I don't want to lose the life quality we have.

Pre DC but about your age we maxed out what we could borrow but it was driven by the house rather than planning to spend the max we would be able to borrow. Was great but couple of redundancies later and ASD DC later mean we have downsized and it is great having a smaller mortgage. Think it depends what the difference is in what kind of property you could get for those amounts and future plans

My parents advice was always to take the maximum mortgage - houses are usually an appreciating asset so when you eventually come to downsize/sell/ release equity you will have a much larger pot of money than if you’d been cautious

(I’m a single parent with 3 kids - no CMS - ex not interested - I have the max mortgage I can afford. I also have lifestyle insurance etc if I lost my job)

I’d be surprised if they’d loan you £380k on a £65k joint income.

Be wary of what the mortgage in principle provider says as this doesn’t necessarily reflect what you can actually borrow…!

In these unsettled times it is best to keep the mortgage realistic.

I would never max myself for a mortgage, it would really stress me out! I think the question of where do you spend your leisure time is important, I'm always out and about and love holidays so I went for a cheap house, tiny mortgage and good quality of life. Eg when interest rates went from 2% to 5% my mortgage only went up £100 which is affordable. Some friends went up by nearly a grand, they are stressed and have had to really change their lifestyles.

Remember interest rates could go up. If you stretch yourself now and then interest rates go up when any fixed term finishes, could you afford to increase the payments? Ours is due soon and is going from £890 to £1200.

Borrow what one person can afford maximum. You don’t know what is around the corner.

I think also be prudent and don't max out. Bit different but when I bought my house, I was single so needed to be mindful. I bought a house which had scope for improvement and extension and I've done this as I earned more money so you could look for a house like this which gives you options.

What does he want out of the house? Is he proposing paying top whack for best schools and location or just bigger?

We settled on average I a nice area with similar figures as you used the extra money to overpay. We can comfortably afford a holiday abroad, clubs, activities, vet fees etc and can accumulate savings and put money in pensions. We can move "up" if we want to. But we have space, time and money.

So what does he think the money for the top whack houses is buying?

This is my parents advice too. DDad was a financial advisor. I just wonder if this advice is up to date?
We're wondering the same about stretching ourselves too OP