To think this mortgage is far to much for us

[Pine99]

I'm trying to work out if this mortgage would be too much of a stretch for us.
DH and I both 28 work full time and may want to try for a baby in next 2-3 years. His salary is 100k with a performance related bonus usually another 27k give or take and I bring in 88k gross. We currently own and live in a flat with approx 90k equity and 220k remaining on mortgage....we've had it for 3 years and would like to move into a house close to family and work etc. DH thinks we can stretch for about 750k purchase price. We would be making the recommended 20% deposit from savings and rolling the equity in from the flat to be sold. This would give us a mortgage of 650k and im wondering if this would just put too much stress on our monthly cash flow. We try to save a good bit into pensions and rainy day funds which, especially after taxes etc...doesn't leave a lot of breathing room with a loan as big as this. Online calculators and banks all say its "affordable" but i worry about having to reduce lifestyle spending or savings.

AIBU to think we should have a smaller house budget...?

I think only you can decide what’s more important. I have friends who have put everything into property and lived frugally for a few years and they’ve been happy with that.
Me I took a mortgage 100k less than I could have had because for me having money to do stuff with us much more important.

Is there any room for compromise either way. So slightly less mortgage for you, rather than cutting right back?

Given your age, is it likely that your earnings will increase over the next few years? And if something happened to either of your jobs (including maternity) can you easily release some of the rainy day funds to paying off the mortgage?

If both those things are true, I'd probably be up for stretching to the best house we could afford and just overpay as much as possible with bonuses, etc.

Would the result still be affordable if you factored in childcare?

It does sound high tbh

We have a similar income and have just extended to a mortgage of just over 400k. With 2 kids in full time childcare plus wanting to have holidays etc it’s about right. Any more and we wouldn’t have money to do fun stuff.

Could you also afford life's little luxuries like holidays, or would you have to sacrifice those? You need to factor in treats like meals out, days out, otherwise life could be quite miserable.

Yeah just make sure you factor in mat leave and childcare, the latter of which can cost £1k + per child in the early years. I am not sure what childcare benefits you would get on your salaries.

Also think about the tax you'd pay on moving - then work out if this is a forever home or a temporary move.

At it’s highest our mortgage was £500,000. It has been ok, but very hairy at times. It’s a hell of a lot of money to pay back. If you aren’t tremendous worriers I’d probably say go for it, but it might be a gamble which doesn’t pay off.

I would expect that both our salaries would increase over the coming years but i imagine a good part of that would be taken up with potential maternity leave, child care etc. Yes we would could certainly use some of the rainy day funds to help us through a rough patch but in our minds this money is really for periods of possible unemployment (both of us are in economically dependent jobs) and new house upgrades which we would expect to have to have some of. Aside from pensions we would have about 165k left behind that we would earmark for this but would be hesitant to tap into it unless true emergency. (yes i know we are lucky to have been able to save this much)

As high earners are you thinking private schools do any children?

What if you catch for twins or triplets? (It happens)

Is there a reason for example you need to spend quite so high?

Or could you have a big mortgage and pay off lump sums for the next few years before thinking of children (they are expensive)

No plans on private education. Neither of us had it and it didn't do us any harm. We spend a lot on eating out and take aways mostly due to convenience and laziness and time constraints after work etc. I imagine we could cut back here a bit. But after Cars and trips to see parents living abroad we do seem to have a lot of "necessary" expenditure too.

All these numbers making my head spin! its almost like i want to trial paying that kind of mortgage for a few months and see how i feel. Housing is just so expensive round here...were not exactly buying a mansion

Why not do exactly that OP.

live the next 6 months with the new hypothetical mortgage payments. Put the extra in the rainy day pot and see how you get on.

You'll soon see if it's feasible for you.
Good luck.

I don't think it's too much
My DH earns £98k
I earn £88k
Rental income of around £5k

Our mortgage is £750k, was £3.2 pcm now is £2.6 pcm.

We have 3DC one was in nursery last year.

Went on x2 luxury hols this year costing £10k
Kids do everything they want etc

It is affordable

If you have £160k in savings after mortgage you’ll be laughing. I hope that is invested and not sat somewhere earning peanuts?

At your level of income and with your savings buffer you can take a degree of risk. You might have to be prepared if/once children come along to prioritise mortgage over holidays/other spending but that is a choice. We have a very large mortgage and sometimes it terrifies me but I love our house and have been happy to prioritise it over holidays. Other people wouldn’t have been happy to do that and only you can know whether that pressure is worth it to you.

Bloody hell; kids today!

Sorry but the numbers you’ve given aren’t all that relevant to affordability.

You need to be looking at what your mortgage costs now and how much you save per month now. Then decide how much you’d like to be able to continue saving per month (half of current or much less than that).

Once you’ve arrived at your figure for what you will be willing to pay on the mortgage every month, reverse engineer the calculation against a stress % (I think the banks currently use 7% which is high, you could use 5%) to give you a mortgage total and there’s your answer. So the amount you want to pay per month, on the mortgage term you want, assuming a rate of 5%, what would the total mortgage figure be. Add deposit to that and there’s your house price.

Use a mortgage calculator to do the calculations most banks have one online.

For reference: I'm a grown-up, living with my partner and our two teenaged children, in one of the least affordable areas of the country. I earn 30K. He runs his own business, and just started being liable for tax last year. I save into a pension fund; and for the following year's holiday; and into an emergency fund, every month. We're fine; but I worry about money pretty much all the time. I realise it's all relative, OP - but seriously, you don't know you're fucking born.

The OP doesn’t want to take on a mortgage that might be too expensive for their lifestyle, I don’t see what’s wrong with that.

It’s not like she’s throwing her toys out of the pram about not being able to afford a £1mil property. I don’t see anything ‘spoilt brat’ ish about her post.

Think you need to look at the monthly cost of the mortgage and what will happen when interest rates go up.

My DH and I have a big mortgage and whilst we can afford it, it does take a massive chunk of our money (which I guess a house generally will).

We decided to invest in our house as the mortgage will slowly decrease as it gets paid off. Sometimes we question that decision as I'm now part time after 3 kids (3 lots of maternity leave and nursery fees) - we have less flexibility than would like but love where we live.

Although your earnings will likely increase, they'll likely take an initial hit if you have kids - plus kids are v costly !

Frankly, the OP has all the figures at her fingertips. I'm really not sure what advice she's after - unless it's the difference between 'to' and 'too'.

Sincere apologies, OP. That was petty and childish of me; not to mention self-indulgent. I hope you find a house, and mortgage, that works for you. Best wishes.

Multivac -

OP: I don't understand your figures. £750k purchase price, 20% deposit would be £150k, but mortgage is £650k?

Have you factored in Stamp Duty and other costs? And ongoing costs - presumably Council Tax and insurance will be more than you are paying now?

Use a mortgage calculator to see the cost of monthly payments at higher interest rates. A PP said banks stress test at 7% and thought that was high. Personally I would use 8% (and 10 or 12% to really scare myself) because I'm old enough to remember when interest rates were in double digits and lots of people were having their homes repossessed. I think interest rates have been low for so long that people have forgotten what 'normal' looks like.

Ultimately it's not just about whether you can afford such a high mortgage, it's about how risk adverse you are and what your aspirations are. At your level of income you have choices: an expensive house that will be the jewel in the crown of your lives, or a cheaper house and the flexibility to make other life choices, eg over paying mortgage and being mortgage-free more quickly, working part-time or not at all after you have children, a comfortable lifestyle and freedom from money worries.

live the next 6 months with the new hypothetical mortgage payments. Put the extra in the rainy day pot and see how you get on

That's a great suggestion. As well as working out how you can live on the new budget, you should boost your savings so could take out a slightly smaller mortgage, or keep some money back so you can afford any new furniture, decorating etc that the new home might need.

It's also a good idea to moderate your spending in the time leading up to a mortgage application because they take essential and non essential outgoings into account when assessing affordability.

Basically they don't trust people to cut back on things like eating out if their income dropped or interest rates rise to prioritise the mortgage over non essentials.

thanks so far for all the good suggestions especially pretending to pay potential future mortgage into a separate account! definitely will try this with DH.

I know its such a personal choice and everyone has different comfort levels but i just wanted to ask WWYD in our situation. So appreciate the feedback so far.

I am not unaware of the fortunate position we are in to be able to do this. We both had ordinary upbringings, went to state schools etc we wernt super tight for money but both single parent families so not exactly spoiled...coincidently we both now earn a good bit more than our parents. We certainly appreciate the good fortune we have, that said we both have worked hard with our education and continue to do so and spend time on professional qualifications. We have both been working in some fashion since we were 16 and i still hold my waitressing job that I've had for 6 years....now a second job. I understand that some folks might think we "don't know we're born" but trust me we do. There does seem to be a theme on MN of bashing people who have higher than average salaries. We still have our own issues and should still be able to ask for advice without being branded out of touch. After all there will always be people earning less than you that envy your position and cant imagine why you have money "problems"...its all relative.