Mortgage risk - WWYD?

[Bullshitbingo]

Hi all - about to remortgage (current mortgage term is up at the end of March), and DH and I are in two minds about what to do. Advice would be helpful as we don't really feel comfortable discussing the ins and outs of our finances with people we know IRL.

We own a 3 bed property in outer london that is worth about £400k. Our current outstanding mortgage has about 28 yrs left (we're only early 30's) and £140k outstanding.

So repayments are low which is handy because i'm a SAHM at the moment. We have two young DC, one of whom is starting school in Sept so i'm planning on going back to work in 2017 when childcare will become more affordable. Currently for two children it would cost more than i could earn. My DH has a relatively well paid job, but unfortunately nearly a third of it is made up of bonuses which are regular (every month and quarter) but do vary, so not all mortgage providers will take them into account.

If you're still with me... we have wanted to extend and improve the property since we bought it and now we have the kids we're really feeling the need to have more space. Its impossible to entertain for example because we don't have any dining space for more than 4 people. We can't have parties for the kids birthdays of more than a few people. But - it will cost a lot to extend and if we get a bigger mortgage (think £220k instead of £140k) my DH is worried that we may struggle to remortgage in a few years. The repayments would not be an issue as they would still be very low monthly, but in four years for example if the interest rates go up and we have to remortgage over a shorter term (because of our age) then he worries we would have to sell because we wouldn't meet the mortgage provider affordability requirements.

We would hate to do this, our house and area are modest for london, but very handy for commuting and good schools etc, if we had to move it may have to be a long way out, away from friends and family to something even smaller than we have now. I think its worth the risk of borrowing more as i am pretty sure over the next few years our income will go up, our outgoings will go down (with both kids at school) and even if interest rates go up i suspect house prices where we live will rise enough to keep us in a half decent interest bracket. However if we don't borrow now, we may find it hard to do so in a few years for the reasons outlined above.

Garrrr - sorry its so long, i'm just not sure what we should do.....Help us decide please!

Based on the info you've given, I'd say do it. However I can see why you're husband might have reservations as he's the sole earner. Could you wait until 2017 when/ if you've found a job? You'd have a better picture of your finances then.

Presumably you'd add value to the house, so the LTV would be better, giving you the option of a better deal. I'd go for it. Or you could speak to an independent financial advisor, usually just a couple hundred pounds, for expert advice.

I don't really understand why you think it'll be harder to borrow in a few years time than now.

From what you've said, I'd have thought the reverse is true.

If you're not working then you and your children will be classed as dependants on your husbands salary. Add to that the non-guaranteed element of his salary and you might find affordability is very tight.

In a few years time you would be earning and have very low childcare costs.

Have you spoken to a broker to find out if it is possible to extend your borrowing at this stage? It does sound like it might not even be possible so there's no decision to make.

Your term won't extend unless you want it to. If it's 28 years now and due to expire when you're 60, then in 3 years you'll have paid it down to 25 years so will still finish at 60. So a provider shouldn't have any issues on the retirement age front.

Provided you're comfortable with the payments now and feel you have some wiggle room for increasing interest rates, I'd say do it. In a few year's time you could be earning again, or can go and get a job if you feel you need it for remortgaging.

Even at 220k mortgage that's only 55% LTV which is very comfortable for mortgage providers, and the market value may well increase in the next few years too.

Thanks all for your input. Had another chat with DH and he's now convinced we should borrow the extra to extend. His reasoning is that the increased value of the property with the extension and improvements will improve our LTV next time we remortgage (in 2 years) and we're pretty confident we'll both be earning more by then as well. I on the other hand am getting more nervous, but i think i'm going to go with him. Fingers crossed the housing market doesn't go tits up again in the next few years