AIBU to think this mortgage increase is still manageable?

[SpreadsheetLife]

We had our first child last year and we are looking to move to our 'forever' home later this year as we're feeling very cramped and would like to try for another baby. We would be looking at a mortgage increase of around £1000 per month however which makes me feel very uneasy!

Our joint income will be around £6400 net per month.

Joint expenses in new house:
Mortgage and bills (inc everything - subscriptions/dog food/insurances/phones etc): £2600
Car loan payments: £350
Food shop: £500 (could easily cut this down if needed but this is current average per month included treats and household items)
Car Servicing/insurance: £150
Fuel: £60 (wfh and one car is electric)
Childcare: £230 (3 days per week)

Savings/Sinking Funds for investments/holidays/big expense items: £1500

This would leave us with around £900 between us for discretionary spending for clothes/days out/eating out/hobbies/birthdays/extra savings etc.

We have around £30K in investments/emergency savings, no debts other than mortgage/car loan and both saving into pensions - DH's is very good.

At the moment, the extra is going into savings and DH is due to pay off his student loan early next year which will be an extra £250 per month, he works in a unionised business and annual payrises are always well above inflation.

I have a good maternity package - 3 months full pay and 3 months half.

AIBU to think we can manage this increase comfortably? I'd be interested in responses from people with similiar income and outgoings and how you feel about it - I know logically we are in a very privileged position, but I've never felt well off, shop at Aldi and all my clothes are from Vinted.

You have more left over after all your expenses than I earn…. So I’m sure you’ll be fine 🙄

It sounds fine to me, although you'd have to add childcare for baby#2

Won’t you have any nursery or childcare fees for the new baby?

You’ll presumably eat into your savings for estate agents fees and all the rest with selling / buying, and need to furnish a bigger house.

You’ll also either eat into savings or not build them up when you’re on maternity leave leave - it’s not the best package (still better than statutory!).

Our joint income is about £3k more than yours, and mortgage / council tax / subscriptions / insurance etc is around £2400. I wouldn’t be overly comfortable with those fixed outgoings being 40% of my income, but just because I would hate the potential for rising! I guess if you fix the mortgage for a long time that would be alleviated.

Where do your expenses for hair cuts, kids clothes, uniforms, kids clubs etc come in?

Looking at this I’m a bit concerned you’ve underestimated some of the costs.

I think it sounds fine. By the time you pay new nursery fees for a second DC your first DC might be in subsidized hours or even reception class.

I wouldn’t do it based on your income but if you are happy to lead a relatively frugal lifestyle then you’ll be OK.

I value experiences more than a bigger house so am happy to live in a property that is worth not much more than 1 year’s pre-tax income for us.

I don’t think that £2.4K savings/fun money a month = frugality.

£900 seems ok but not flush. We have more than that left yet it goes really quickly with children etc. It depends what type of lifestyle you want to lead. Will you be saving for holiday etc out of said £900? What about childcare costs?

It’s definitely doable tho.

It depends when you want to retire and what you want to do with your time between now and then. I’d be seriously unhappy with those numbers but that doesn’t mean it’s not suitable for others. We all have very different goals in life.

Unaffordable absolutely not.

Yes but that's not frugality. That's choosing how to spend a significantly above average household income.

We earn slightly more and have similar outgoings though our joint going out money is included in that total and the remaining is divided as personal spends. Holidays are quite cheap and we don't eat out much and extra expenses you haven't included is children's hobbies etc plus the childcare will continue - even though ours at school wrap around care is more than your current childcare bill. Seems like you would be ok to me but what have you been spending that extra £1000 on now? If it is usually saved then I guess you are ok. Also do you only have childcare for 3 days as you are now part time because that gives you scope to increase hours later on and have more income

I think that's fine. You have a good disposable compared to many. Childcare is temporary and after a few years you will be better off and mortgage rates won't always be this high (surely! I am hopeful). Good luck OP

We’re in a similarish position financially, but slightly higher income and slightly lower housing costs and with two teens. Personally, I think you can do it, but I wouldn’t say its comfortable - it feels quite tight to me given the cost of living and the rate it’s increasing at, but only you know how much you can cut back if you need to. Do you currently save £2500 a month (the extra £1000 your mortgage will be and the £1500 you refer to as being available to save or spend on things that come up)
or save that most months outside of incidental things coming up? I am asking as your budget suggests this, but if that’s the case £30k doesnt seem a huge savings pot… I only ask this as it’s important not to let yourself think you have more available money than you do - in my experience, there is always something that eats into potential savings each month with a house and kids and these things increase with more kids and a larger house.
In terms of bills for the house, it’s not clear how you’ve worked these out and youve probably done this, but do bear in mind any increases to council tax and bills with a larger property - our current property is not huge but the difference in bills between a small 3 bedroom and a reasonable 3 bedroom with loft is not insignificant. Also, you need to take into account possible increased mortgage rates / costs and the additional costs of two kids and kids as they get older - you might save on childcare (or not depending on whether you still need it as they go through school), but in my experience they have endless things to pay for, such as school trips, and also cost a lot more in terms of food and clothing as they get older.
You may well have taken all this into account, but I mention in case any of it might not have crossed your mind. Only you can really know whether you can cut back and if the compromises that would involve would be right for you. For us, it was / is, but we did have to think long and hard about it and we don’t go out much ☺️.

We have a similar income and umming and ahhing about moving as mortgage and council tax would be around £2,600ish. I'm nervous about it but i'm mid 40s, we'd be mortgaged until 68 and it would only be a 3 bed (box room) semi that needs modernisation for our location. If i could get a detached mostly turn key i'd go for it

I know you listed it all out but I would break it all down a lot more. I would also do a similar breakdown for when you are on mat leave.

this is ours for example

Me 3100
DP4100
CB 280
Total 7480

Housing
Mortgage: 1900.
Insurances(life, house): 150
Property tax: 50
Total Housing: 2100
Utilities
Electricity 60
Waste collection: 25
Broadband & TV: 70
Mobile phones x3: 60
Total Utilities: 215
Food & Groceries
Groceries & household food: 500
Dining out / takeaways: 200
Total Food: 700
Transportation
Fuel: 150
Car insurance & tax: 140
Maintenance & NCT: 100
Total Transport: 390
Education & Kids
School books, uniforms, fees: 50
Activities, sports, clubs: 50
Pocket money/treats: 60
Total Kids & Education: 160
Entertainment & Lifestyle
Family outings, hobbies, gifts: 250
Subscriptions: 20
Miscellaneous expenses (haircuts etc): 60
Personal spends:250x 2 = 500
Total Entertainment: 830
Savings & Miscellaneous
Emergency fund / Savings: 2,000
Holidays (monthly allocation): 500
Clothing: 200
Miscellaneous buffer: 300
Total Savings & Misc.: 3,000
TOTAL MONTHLY SPENDING: 7,395

Fair enough, but that amount is equivalent to the UK median household income before anything has been paid out.

So to answer some of the questions posed:

We are planning to start TTC when our DC is around 3, so by the time we are looking at childcare, DC will already be in Reception. We both have quite flexible WFH/hybrid jobs and so we can hopefully manage without a lot of wraparound care.

I currently work slightly reduced/compressed hours for a day off and grandparents help with childcare one day per week.

This is based on our current salaries, however there is a lot of scope for our salaries to increase in the next few years as the children get older. Hopefully this will offset the additional costs as children get older.

The mortgage/bills are based on our current bills, adjusted for larger house - e.g council tax/gas and adjusted for inflation.

We are currently saving around £2000 per month give or take, but DH will pay off his student loan in the next year and both our joint pay will increase by £300 by next July due to annual increases. Six years ago, DH and I were earning less than half of what we currently are, and we had a lot of expenses such as buying a house and getting married and spent a few years doing some big trips - roadtrip through California etc and I have been on maternity leave for the last year, hence having not saved a huge amount. We were still able to save around £1000 per month during my maternity leave and did some big holidays.

We save into pensions seperately through workplace schemes so this isn't included.

We don't have expensive tastes - holidays are our largest expense. Days out tend to be national trust/english heritage properties and picnics, no expensive hobbies, most of my clothes shopping is on Vinted and we do our main food shopping in Aldi. Occasional brunches or dinners with friends, neither of us really drink and we're not out every weekend. We spend a lot of time at home so we want to be comfortable!

Thank you.

We are going to save seperately for sols fees/moving costs, so these won't come out of our current savings.

We are very cramped atm and so we wouldn't need a lot of extra furniture, we would just have more room to spread out! Currently DH is working from the kitchen table on his WFH days and I'm in the far end of the lounge so extra room is much needed. Our bedrooms are tiny and really not big enough for growing children.

At the moment haircuts etc come from our discretionary spends. We don't really have any child related costs at the moment, however, appreciate these will increase as the children get older.

The costs are adjusted for increase in size and inflation next year, but not taking into account anything beyond the next year. However, we both have more earning potential - so although I appreciate it is not guaranteed, I'm hopeful that increased pay will offset these extra costs in future. I don't want to get too far ahead of myself however - I figure we will just cut our cloth accordingly.

Childcare - we are aiming for DC to be starting Reception when the next baby is starting childcare - I think we have enough of a cushion with our savings if there is any crossover.

Whilst I'm wary of not taking on too much, I also don't want to be 10 years down the line and feeling like we could have stretched ourselves further - I feel as though a house is an investment that we get to enjoy in the present.

Are your childcare costs right? £230 per month for childcare 3 days per week!

I mean no one can really tell you this. Your figures do look a little naive imo.
It’s not massive “easy” to reduce down from £500 for a family of 3. Do you never buy a take away? Eat out?
Spend money on days out? Entertainment? Clothes or new items for DC?
Holidays?
Local trips?
Will you not want to do up the new house? Stretching yourself to get your dream house and then struggling to keep it homely won’t be that pleasant. If you plan to slowly decorate it you’ll find £200 a month will probably come straight off that available £900.

The figures, e.g. food costs and spending money are based on our current spends - at the moment the extra is just going into savings/student loan.

At the moment, £900 per month is more than enough for days out/eating out/new clothes etc, we are not big spenders. Holidays and big purchases come out of the savings/sinking fund pot.

Any decoration/furniture will come from the £1500 sinking fund/savings per month - we likely will cut down on holidays next year.

We also get bonuses - around £500 for me and £2500 for DH net per year.

Yep - we get 30 hours free, so we only pay for one day per week - £68 per day, works out as £230 per month into the tax free childcare account. We aren't charged for any extras. We live in the North West so it's pretty reasonable!