Is borrowing 300k too much?

[baileysyumm]

Looking to move to a bigger house soon once both kids are at school. Would have about 100k to use as a deposit and looking at houses worth around 400k.

Our monthly income will be about 3.9k and the mortgage over 29 years. Repayment calculator is suggesting interest rates at 3% would cost about £1300, which I think is doable for us.

However, borrowing 300k is coming up to 5 x our annual income! Do banks even lend this high a multiple?!

For our first home we could only borrow 3.5 times income although we did have slight childcare costs then.

Has anyone else been in a similar position? Thanks.?

5 x combined - unlikely to get it.
You need to do a budget sheet and play devils advocate : eg job loss
with your finances

£300k is a pittance for some and Everest for others

We got 5x last year. The repayments are fine now, and doable although not great if interest rates go up.

That repayment is a third of your income - I'm not sure it would get through the (apparently now much stricter) affordability tests.

You should use a broker, more likely to get it. Repayments seem do able on your take home assuming child are costs low. London and Country are no fee and very good.

Gah,autocorrect. That should say childcare costs low!

We did, ()moving next month) although on higher income than you but with childcare costs. It's about 3 x our combined income though.
I find it scary but it is doable each month, it's nearly double what we're paying now though. They were willing to give us nearly 400 k.

The assessment is based on affordability these days rather than multiples of salaries. What are your other outgoings? Childcare costs? Credit cards? Loans? etc etc.

Also, that loan to value ratio is 75%. When we applied last year, lenders seemed to favour LTV of less than 70%. That's not to say they wouldn't have lent at the higher LTV but the interest rate would have been higher...further impacting on the affordability assessment.

Talk to a good broker and explore your options.

Thanks for the feedback. DH and I both get childcare vouchers which would cover all the childcare costs and I have already factored that into our monthly income. So 3.9k plus £486 which will go directly to childcare, so shouldn't need to eat into 3.9k for childcare. If that makes sense!

Also we don't have any loans, credit cards.

I think if either of us lost our jobs we might be in a bit of trouble with that size mortgage though!

What if interest rates go up?

I got a 5x mortgage this year through London and Country but 5x for me is £100k. They didn't even consider what the income multiple would be it is purely affordability so if you can show with 6 months bank statements that the repayments are affordable and have a clean credit score you should be ok.

£1300 doesn't seem like a very 'out there' figure for mortgage payments/month if you take home £3.9k after all defections including childcare.

It's higher than I'd be comfortable with but I think I'm in the minority.

Our mortgage is £220k and £900 a month and our take home is about the same as yours. I think we could afford a higher mortgage but I prefer to underspend than stretch ourselves too thinly.

*deductions

Currently looking at similar numbers. What will your savings be like after the sale? We have looked at how many months we could go if one of lost our job. What other outgoing s could you stop if needed? Eg we have private pension payments we could stop.

£3.9k combined and you are happy having a £1.3k a month mortgage? What if rates go up? What if one of you loses your job? Have you factored in higher running costs and council tax?

We earn £5k combined and pay £1k mortgage and we don't have lots rolling around at the end of the month. It costs another £1k to run the house with all the bills then car running costs etc take us pretty close to our £5k.

I honesty wouldn't be comfortable having a mortgage that high on your monthly income. But if you are then go for it.

I think you will be allowed to borrow that much based on your combined income. Especially as you have said you do not have any other debts. We borrowed a similar amount last year when we moved with a lower deposit than yourselves and got the mortgage easily. However our combined income was higher than yours. Good luck and go for it!

We've got similar income here, and our mortgage is 1250 a month. Plus ft nursery fees at the moment til September.

Our rate drops this month, and our payments will be around 900. It's been a tough couple of years but it is doable.

Exactly what Meloncoley said. If mortgage interest rates continue to hover around their current level for years longer you should be fine. 1300 in monthly mortgage payments is eminently affordable on 3900 take-home.

However, we ate currently in the seventh year of a record low that everyone says cannot last for ever. It could last for some time yet though, so it's probably OK to go ahead but make sure you either overpay the mortgage or pay into savings a monthly amount of at least £150 so that your standard of living doesn't have to take a sudden hit when rates do start to rise.

I would consider how you would manage when interest rates go up. They're at a historic low now, and I wouldn't count on them not rising in the next 29 years.

Snowberry that's really interesting. We have hardly anything left (no savings) on that income and mortgage of 1400. I keep going through the bills to reduce and can't find any savings.

Op, I'd think about job security and comfort zones.

X-posted

Are your incomes likely to increase in the future? I think I'd only gamble on interest rates staying low if I was hoping for an increase in salary.

What would the payments be over 25 years? Can you overpay on the current plan?

We were accepted for a large mortgage that was roughly 40% our monthly take-home (excluding bonuses). It was ok and we could still save but a bit worrying particularly around job security for my DH. As a result we have extended our term from 21 to 25 years.

It is important to think through back-ups: ability to term extend, I work PT 4 days so could go up to FT, we have an offset mortgage with associated savings, cheaper nursery/childcare options if needed.

It has still caused some worry as it has been much tighter living than our prior place.

Also, consider what other costs will change with a different house, eg bigger house means higher council tax and insurance.

Yes its doable but it depends what other expenses you have and what your priorities are. Similar mortgage here, higher income but 3 children. We are "comfortable" (in my view - perhaps not in others' views) but we don't save much, we don't run expensive cars, budget carefully for holidays, meal plan etc. No gym membership, sky tv etc. Only you know what other expenses your family has / the lifestyle you have.

Yes to increased costs with bigger house - more expensive life insurance, council text, utilities, maintenance.

Council tax damn predictive text!!!