Dream house - Can we afford it

[rpitchfo]

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.

We both work for the NHS so pay into relatively good pension schemes in the grand scheme of things.

We are both 28 so don't have long term savings but i really think the house is under priced and would be a good investment in its own right.

Done a bit more of a deep dive on our current situation.

Our income is actually around £3580 (child benefits, girlfriend just had a payrise)

and if the house sells for 125,000 we should come out with (including savings) - £33,000

Those figures look healthier. Would you offer on the new property before selling yours or try and get yours sold first? You could try living on your income for a few months as if you had the bigger mortgage and see how you manage.

I'm not sure. I'm very British when it comes to things like this and would be mortified if i made an offer on a house then struggled to sell our house at the price we needed to :s.

We are planning to live off £1000 from next month till february (which will let us know if we can do it and help us save another £1000), which really is worst case scenario - that would allow us to continue saving £150 a month and our mortgage would be slightly lower as well with new figures.

When I was 27 I went for a big jump up in property and the figures worked well as DH was getting good rises. So we did another big jump when I was 31 and that was really tough for a few years. Take home pay was about 3.4k and mortgage around £1450 but we ran 2 cars and had train ticket to buy. I personally wouldn't want repayment to take up more than one third of joint salary.
I think every single penny of your savings would go on deposit and moving costs. Could you not look at 200k houses with the idea of adding a conservatory/loft or whatever on in the future?

rpitchfo now that I know you are both working for the NHS, I think you'll be alright even with a larger mortgage. It's very stable isn't it? (Or that I think it is). And the NHS pension is very good and I wouldn't worry about it yet. The reason we only went for 2x joint salary is so we won't struggle on our mortgage payments on one income.

But we did regret it and think we should have gone for a bigger house. We never predicted BoE rates have stayed so low for so long. Now we need to move again because it's very small. (We are overpaying by the same amount as our repayment, and the entire mortgage is going to be cleared in about 4-5 years time, i.e. within 10 years after we've taken it out). In hind sight, we should have got the next sized house and save on the stamp duty and moving. But no one has a crystal ball, have we?

We've moved into the dream house , with a massive mortgage .
Self employed ( both of us ) no childcare costs ( unless you count sending money to DS in Uni )
It was a case of " if not now , when "
Yes the money is a worry , but we manage .

I personally think judging a mortgage on a % of your income is unrealistic. Our mortgage is about 30% of our joint income, but once you factor in massive childcare costs, £300 petrol a month (commuters), repayments for a couple of small loans from parents, and all the expenses that come with 3 children, there is nothing left (and I mean nothing). My sister (and BIL) pay 50% of their joint income on a mortgage, but have much smaller utility bills, no childcare, no commuting costs and have about £2k a month more than we do as disposable income.

Just be realistic about what you can afford and what you need to live. Be realistic about pay rises (if any), the need to maintain the house, rising interest rates (inevitable in the long term). Being frugal is OK for a short amount of time, 5/6/7+ years of worrying about finances is not. Are you staying put? Is it a long term house?

Also depends if the house needs a lot of work doing to it, if money is tight it might be difficult to even afford redecoration.

Also from bitter experience car loans don't actually ever seem to disappear. No sooner have you paid one off and car is getting older, needs repairs etc and you need to buy a replacement, like a vicious circle especially if you need to run two cars.

Please please just keep interest rate increases in mind. Interest rates have never been this low before and they can only go up. They could quite easily go up five percent very quickly. Could you afford 5 percent more than you're looking at paying at the moment?

Jus because it would mean thousands of people would struggle with their mortgages doesn't mean it won't happen. Quite honestly thats a bizarre way of looking at things. It has happened before it will happen again.

OP - you say you're thinking os a low offer but then you say that the house is under priced and would be a good investment. You can't have it both ways

In all honesty I think this house is too expensive for you. You would be one unexpected pregnancy or one car write off way from being very badly off.

I think your level of savings and equity are too low. The figures only just about work to put the 10% down if you get the full 115k on your home. Would you get that figure in time to offer on the dream house? I'd think about around at looking properties for under 200k if it was me.

I meant 125k not 115k.

Have you factored in that the larger house may have higher running costs? council tax / heating / upkeep of building

A dream home sounds wonderful but don't sacrifice being able to afford the lifestyle you want. I've lived with having to scrimp to pay the mortgage and now choose to have a smaller house but more holidays, days out etc

creamy cooler yes we know this is only possible at 125k.

Schoolmum yes, done a spreadsheet on worst case scenerio running costs and it leaves us with about £1000 a month after childcare etc down from £1600 a month in our current situation.

so as others have suggested we will be trailing living on £1000 a month from january and using the 600 a month to go towards moving costs. fingers crossed nobody makes any offers in the meantime.

Just been to see a financial advisor...they said it was doable and affordable at 250k but 220k would be a little bit more realistic.

Just bear in mind that some people eg mark carney are talking about a house price correction next year. Personally I'd leave things and wait a year. A correction is about 20 years overdue, and once a slight one does happen it could be like a stack of dominoes. Netherlands market has recently collapsed (according to bbc) and belgium is slow.

You are very lucky to own a home at all, especially at your age. I'm nearly 40 and it's looking like an unobtainable dream.

Time is on your side as you are both still in your 20s. If not now...? If you are prepared for the financial sacrifices ie nice cars, holidays may not be affordable as well as the house then I'd say go for it.