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Original poster

Dream house - Can we afford it

44 replies

rpitchfo · 01/12/2013 21:33

Just want to see if there is anyone out there with a similar type mortgage and income to see if we could manage/ live on the following scenario.

Current set up:

House: £125k (got about 16k in it)
Savings: £12500

Income: £3400 per month (both earn around 30k each a year and should expect to see modest payrises annually)

Direct debits: £1,295 per month (car £268 2 years left, £557 mortgage - overpaying, £150 savings, other bits and bobs - water, G&E, phones, specsavers, insurance, council tax, TV)

Childcare: £480 per month

That leaves us with around £1623 per month for everything else but we usually get that down to a nice round 0.

We would like to buy a house that is £250k. Is it doable? I think we would probably need to find a bit more money just to cover the move never mind a standard of living if we did.

OP posts:
ItStillLooksLikeRainDear · 01/12/2013 21:43

If you know your jobs are secure. It looks possible. You may find the first year a bit of a stretch but if you are currently overpaying & your car is paid up in 2 years I would go for it or it 2 years that house could be £300+

ivykaty44 · 01/12/2013 21:43

your disposable income is £25k per year so an above average wage for a whole other person - I see no reason why you wouldn't be able to spend another £800 per month on mortgage but you would need to spend wisely if you want to be comfortable.

Will you be able to borrow that amount?

Original poster
rpitchfo · 01/12/2013 21:48

Thanks for the replies:

ivykaty44 i think so, i've had a look around and it looks like we can. Ideally i wouldn't want a mortgage over 220k though so would use any equity and savings to put a bigger deposit down as possible. Would that be that best approach? To blitz my savings or just get a bigger mortgage.

OP posts:
ExcuseTypos · 01/12/2013 21:51

It depends what the morgage repayments are.

Youve only got 16k in the house, and presuming you'll need your saving for moving expenses, you'll need a morgage for £234,000. Do you know the prepayments on that amount?

Original poster
rpitchfo · 01/12/2013 21:58

well i'd need at 10% deposit so max mortgage would be £225k and the repayments range from £1100-£1400.

We only moved into our current (first) house 2 years ago (we are both 28 so a little naive to how circumstances could potentially change i.e interest rates shooting up)

OP posts:
Preciousbane · 01/12/2013 23:05

This reply has been deleted

Message withdrawn at poster's request.

LadyKooKoo · 02/12/2013 14:11

Assuming you get £125k for your house, after EA fees, solicitors fees, searches and stamp duty on the new house you will have circa £20k in a deposit for the new house. Definitely don't look over the £250k mark becuase of the increase from 1% to 3% on the stamp duty. If you have a £20k deposit then you will be having a mortgage of 90-95%. Personally, i would only do it with a mortgage that high if I could fix for a long time (5 years min) and be confident that my salary would increase a lot during that time. Also take into account that with such a tight budget, you are going to have no savings left to do any work on the new house and if you are mortgaged to the hilt then you won't be having much spare cash to build up another savings pot.

WowOoo · 02/12/2013 14:19

As PreciousBane said, I'd try to work out if you could afford it when interest rates go up. (Rather than base it on current interest rates - look at the worst case scenario)

Especially if you are going to use up your savings. I'd keep some aside if I were you - you never know what you might need them for.

Fairylea · 02/12/2013 14:29

Its quite a big leap from where you are at the moment especially as you say you always end up at 0 at the end of the month. Things will be even tighter!

Personally I'd always go for a smaller house and more money in my pocket. Dh and I currently have a house worth 200k and a mortgage of £392 a month through careful downsizing and we are talking about downsizing again to save money.

I would be careful not to overstretch yourself.

Original poster
rpitchfo · 02/12/2013 15:17

Spoken to estate agent - been on market 6 months - no offers. Do i just go in and chuck in a silly offer like 220k?

OP posts:
LadyKooKoo · 02/12/2013 16:59

Worse thing they can say is no. Worth a shot!

CreamyCooler · 04/12/2013 13:33

I think a mortgage of four times joint salary is too high bearing in mind rates can only go up.

Original poster
rpitchfo · 04/12/2013 14:10

I don't think mortgage ratios are a good way of looking at affordability as it doesn't take into account individual circumstances. If we got a mortgage for 220k we would still only be spending 30% of our joint incomes on the mortgage and some people might be paying that with a much smaller ratio.

OP posts:
CreamyCooler · 04/12/2013 14:20

Fair enough, I was just thinking back to when our household income was 58k and mortgage £1450 a month and we found it really hard. I would just be cautious as you have only known rates low (whereas I'm an old bird who remembers them at 14%).

eurochick · 04/12/2013 14:21

If you go for it, get a fixed rate.

evertonmint · 04/12/2013 14:24

A house is only worth what people are willing to pay for it. No harm looking and throwing in an offer that you feel is manageable. They can only say no in which case you are where you are now, and 6 months with no offers suggests they might need to look at any offers that do come their way.

30% of joint income on mortgage is usually considered manageable. Looks like you have no other debts. I would suggest looking at the £1600 you spend and trying to understand what that goes on because that is going to be the trade off - bigger house for less spend on food/going out etc.? Remember with a bigger house that maintenance, council tax and utility bills will be higher.

How much longer do you expect to have childcare payments for? Any more children likely? Once they start school you will save all or a large chunk of that £480 which can go towards the mortgage.

Try one of those internet calculators and increase the interest rate by 1%, 2%, 3%, 4% etc to see how buffered you could be. Interest rates are going to go up at some point in the next few years so your mortgage rate will increase. Might be good to look at a longer term fixed if you feel a rate rise would be difficult for you to manage, but obviously at the end of the term you could be faced with a much higher monthly payment. However salary increases, lower childcare costs etc may counter that.

Original poster
rpitchfo · 04/12/2013 14:51

Thanks for the advice creamy and Everton. If interests rates go up massively surely 90% of the mortgage holders in this country are screwed.

Another piece of info is that they paid 150k for it 9 years ago so they are making a good deal of money at 220k (it was up for 290k 6 months ago :0)

I was thinking if we fixed by the time childcare was done and the car was paid off in circa two years we will be 800 pound better off.

OP posts:
CreamyCooler · 04/12/2013 15:10

Not screwed more stretched. The people that are more effected are ones that don't allow a buffer for payment rises, lose a job and it takes a which to get a new one, have a baby, or a combo of these things or have a tracker/variable mortgage.

specialsubject · 04/12/2013 22:25

short memories - it isn't that long since interest rates were much higher.

OP - do I read right that you have £1600 a month for food, clothes and travel? Where does it all go????

Preciousbane · 04/12/2013 22:34

This reply has been deleted

Message withdrawn at poster's request.

Mintyy · 04/12/2013 22:39

Our mortgage is 2 x our joint income and we find we have to live relatively modestly. I would caution against it, it seems too big a leap. Interest rates will go up.

OneLittleToddleTerror · 05/12/2013 08:39

If interests rates go up massively surely 90% of the mortgage holders in this country are screwed.

But you are confusing LTV and income multiples. DH and I got a 90% mortgage when we first got our house. But we were borrowing only 2x joint salary.

Conversely, if you got a large inheritance and use that as a 40% deposit for a house, but borrowing 7x joint income. You won't have much buffer for rate increase.

nilbyname · 05/12/2013 08:48

If you are planning on kids, then I think you can't afford it.

Maternity leave=sharp decrease in income
Child are costs=if you're SE then you are probably looking at 5/6pcm at least. I was paying almost £700.

Interest rates are only going to go up. You need to factor that in.

Could you manage the mortgage on just one salary as well as increase council tax, insurance, utilities?

Don't want to be all doom and gloom, but loads of people will loose their houses as they have stretched themselves.

CreamyCooler · 05/12/2013 12:57

The op has already said her chilcare costs are £480 a month.

LadyLapsang · 05/12/2013 22:53

What about long term savings and pensions? I'm another person who remembers high interest rates - ours doubled in our 20s so we were glad we had a realistic mortgage. What happens if you lose your job, get ill etc. - you will need to get redundancy and critical illness insurance.