To contemplate a £250 000 mortgage

[spoonbill]

My DH and I have a joint income of £75000.
I remember the 80's when interest rate shot up and lots of people lost their homes so have never wanted to have a big mortgage. But we find ourselves needing to move out of our 2 bed flat and to stay in the area and in good school catchment we would have to increase our mortgage to at least £200 000> I think this is madness.But most people I ask have £200 000 mortgages and think I'm strangely risk averse. I'm astonished. Rates have got to go up haven't they? Am I mad or is everyone else mad? And how are people surviving with such big motgages ?

Maybe wait till tomorrow, see how the budget goes and what the interest rate forecasts are?

You can afford it if your jobs are secure, if you have a good deposit/equity in the house, and crucially (according to yesterdays Times) tie into a fixed rate mortgage.

My DH and I have a £200k mortgage. It's just the way things are now. It seems ridiculous to previous generations whose first homes cost £20k or thereabouts, but these days houses are just much more expensive. We have enough money to get by (joint income about £65k although less atm as I'm on statutory maternity pay), and enough "buffer" in case interest rates go up (a bit anyway).

Ours is 325K (sob).

We are overpaying as much as we can afford while rates are low. Our jobs are as secure as anyone's, we both would get good redundancy packages if we were let go, which would give us breathing space for up to a year.

Agree with Laurie.

FWIW, we put down a £40k deposit.

I was originally very risk adverse and previously DH and I only borrowed 2.5 times joint income. However, through various business projects over last 18 months we now have half a million in mortgages (there are three currently).
We are overpaying madly as all our various mortgages are variable rates that we started when interest rates were at 5%.
However, it appears to me anyway that the more managed mortgage debt you have the less scary it gets. Funny thing is bank manager happily told me about 6 months ago that my borrowing hadn't even peaked yet!!!!

Your situation sounds just like ours! Have a joint income of £100000 and considering a 250000 mortgage with about £35000 deposit as we have to leave our little flat. We also have the added complication of owning another house (my old house) which will need to be rented out.
I don't like taking financial risks and am split between looking for a £300000 'forever house' or something that's cheaper but would mean another move in a few years time.

It's all so uncertain at the moment. You sound perfectly reasonable to be a bit nervous about it!

The best way to think about affordability is to calculate monthly payments and compare with today. How much of your current buffer would a new mortgage of this size use up?

For example:
With a 2yr fix of 3.8% or thereabouts, and a 20year term, you're looking at approx £1500 per month for a capital repayment style mortgage.

Assuming your net income is something like £3,750 per month*, that leaves you £2,250 for everything else after mortgage.

60% of 75k = 45k / 12 = £3.75k.

It is horrible isn't it? We are looking at an AUD$600k mortgage when we head back.

Obviously, we don't need to have a mortgage or such a big one, there are alternatives however if you want a standard house in Sydney (i.e. 3 bed, 1 bathroom) in a standard area (i.e. not posh, not feral) then you need to cough up around 800k.

I am not complaining as we can afford it, but it is a big number and quite daunting really.

If your jobs are secure and you know you can keep plugging away at it then it is not so bad. We figure we are going to have to live somewhere so we might as well be paying a mortgage as rent. Even if over the years we spend the same in interest as we would have on rent then we haven't really lost out.

We bought our first house in '89 and interest rates were at around 15%. Have to say that's the figure we've always used when working out if we can afford a new house/incresed mortgage. We do a what would it cost if interest rates went back to 15% and if we could afford to pay it and eat we've always gone for it.

Bear in mind that 'back in the day' ratios of salaries to mortgage were still about the same. Houses were 'cheaper' but salaries were peanuts.

I would be too scared to have a mortgage that big. I am horrified that ours is £130K.

We are also in a similar situation mortgage wise, have more equity in our house but I am about to lose some earnings due to mat leave for a year and prob returning part time after that.

We have decided that if we need to drop to interest only we would do so as we are in our "forever house" and are taking the long view that we will be here 25 years and probably earnings and interest rates would fluctuate over that time so that we eventually paid it off in the end!

Also, if you are young enough, you could consider extending the term in the future if things get tougher.

My opinion is that as long as you have a couple of options to resort to in a problematic time, even though you may hope not to, it is a risk worth taking.

But we are all different and there is no fun in having sleepless nights becase you are worried about it.

(meant to say that obv only interest only until back at work full time etc- realise that would not pay off the mortgage but may help for a year or two!!)

My rule of thumb is can we afford our mortgage (at 10%) and a life if only one of us is working, the banks would have lent us silly money with both of us working but if I got pregnant (I did) and made redundent (ditto) would we be ok. I still think if you can manage it you should only borrow on the expectation of one salary. So I am guess I am risk averse like you

Could you rent for a year in catchment then buy outside?

Ours is just over £200K and we have a high joint income. We put down a deposit of £80K and our monthly mortgage payment is about £1700 (on a 0.89% tracker repayment).

We went from £60k mortgage to £180 five years ago - and tripled the term to take it back up to 25 years. We earn about £60k and my DH is in sales and I'm self employed.

I was very scared as I remember the interest rate rises in the eighties. At least we had quite a bit of equity in our last house.

We fixed for 10 years (at 4.8) which gave us peace of mind. Obviously if we'd gone for a tracker we would be paying less but the peace of mind knowing that we can afford our mortgages makes it a lot easier. We overpay a bit too.

faced with a similar choice, we decided to go for a five-year fixed rate. It is slightly more expensive, but we can afford the payments and will be protected from the current economic volatility.

Another thing we are doing, is going interest only, but making overpayments. That way we have the option of borrowing back the overpayments or stopping making them if times get hard. I think this is worth doing while interest rates on savings accounts are so low

£200K is quite usual round here and not people on salaries as high as being quoted on here either.

As a number itself it sounds scary, but equally these days quite normal.

Look at your budget, have you got lots of room that you could cut back if things went wrong, in order to service it?

We are about to remortgage and borrow a load more cash, but because we have put the term of the loan back up, the repayments aren't that different to what we're paying at the moment.

Bank on interest rates going up in a few years too - choose one with an overpayment facility and make overpayments, or even choose a shorter loan term so your monthly repayments are higher. Basically chuck everything you've got at it.

Why, if you can do overpayments, would you do interest only? I don't ask to be rude, I'm genuinely curious? You aren't actually paying any of the mortgage until the end with interest only so why not just do repayment if you can afford to pay a bit extra? At least then the mortgage actually goes down?

Threads like this really make my tummy turn over, I absolutely dread owing so much money, and I'm paranoid about losing what we do have.
How does anyone manage with a huge mortgage? For example, our income is roughly £26k pa, our mortgage is only £45k, but thats literally the max we can afford to pay back. If we hadnt had a big deposit from prekid savings, there's no way we'd have a house now. How on earth do you all do it? We have no car, no really frivolous spending, yet are overdrawn by £400 a month just on essentials and the odd day out here and there etc.

We have an income of £75 ish with a mortgage of £300000 ish. Not easy but we manage it. It depends on how prepared you are to love simply. If expensive holidays and gourmet foods are essential to you then maybe not, but we manage to live ok without having to struggle too much.