Will the mortgage payments be too high ? Advice please

[Ozster]

I am going to try and keep this short.

We are family of 4 looking to buy in catchment area of a good primary and secondary school.

I am worried we will over-commit ourselves to a large mortage :(

Break down if cost :
Earnings per month=
Me £1600
Partner £1300
My side hustle £500

Costs (in new house)
Mortgage £1200
ALL other outgoings £1200

Which leaves us £500 from our salaries for eating out/kids sports clubs/treats etc
And £500 from my side hustle to save or over pay mortgages

Would this be cutting it too fine ? If I lose side hustle we will only have £500 left :(

Atm we lay £500 mortgage

A second option would be to move into a small, one reception room house instead of a nicer (still small ) 3 bed traditional semi .

I am so confused and stressed. Obvs we need to move for school but the large mortgage payments scare me.

Any advice please ? Or info on your situations that I can maybe relate to ?

Thank you

You need to live like you have the mortgage
So can you currently save the difference?

Will house insurance and car insurance go down?
Do you have savings?
Anything you can cut down on?
Any chance of increasing salaries soon?

I try to over pay current mortgage by £1000 each month so maybe I can start to do that consistently to really feel the weight of having to pay it later ?

Salaries won't increase anytime soon but in the next two years they most likely will.

Can't cut down bills anymore than that

I will be putting aside 10k from this house sale as savings to use as an emergency fund. And also want to get payment protection insurance .

Personally, I wouldn't like to commit to this. If you lose your side hustle then your mortgage payments will be over 40% of your joint income, how secure is it? I'd be more inclined if you were earning a "safe" £2100 a month iycwim. What if interest rates go up in the next few years?

I agree with PP, you need to live now as if you already have the mortgage and see if it's doable. Even so, I'd be unsure in case the payments go up. Sorry, I know that is probably not what you want to hear.

The mortgage alone is 41% of income which is high when it means if one of your jobs goes you stuffed.
So Move to smaller house with one reception and save to extend later.

Nope Defiently not it's not worth it. A nice quality of life and being able to make memories is more important that a nicer house. 500 a month is not much to do this on, out of that 500 won't you still need to buy clothes, put money away for Christmas, birthdays, holidays? What about being able to save for emergencies?

Thank you all for replying.

I think you've all just echoed what I am really feeling deep down .

We do like the theatre and weekend breaks. That would all have to stop :(

The idea of a 'nice semi' ( I've never had one ) just seemed ideal.

But I am only 33 so can get something closer to my dream house a few years down the line when salaries are higher.

It’s a tough one this, because we were in a similar position in our late thirties (I think we were 38). We stretched ourselves to buy and renovate our current house.

It was tough financially because we still paid nursery fees at the time, however it’s ‘speculate to accumulate’ isn’t it? I’m glad we took the risk - we now have a lovely house and it’s risen in value more than our old house, proportionately.

No. Our salaries are more than double yours and a mortgage of 1k and I don’t feel particularly comfortably off after paying for two kids and all that goes with them!

Kids are money pits and it gets worse!

We did it but we are home birds are don't really spend much on going out or holidays so it was not a problem. If having a bigger mortgage will stop you from the lifestyle you enjoy then don't do it.
In the long term there is no better investment and it has paid off for us but you should stay within in your comfort zone and take a smaller mortgage if you are worried

It's really the mortgage providers that will decide if you can afford it. They will stress test your mortgage payment at a higher interest rate in case they rise drastically, so whilst your mortgage payment may be £1200 on 3% interest, it may jump to £2200 at 8% (not real calculation, just example of higher payment). A lot of providers will also include general living costs such as buying new clothes etc and base it on national averages. I would suggest speaking to a broker to get an idea.

Is that your take home incomes?
Depending on how certain you are that in 2 years you should see a pay rise; then possibly worth a temporary stretch.
Do you think you’ll be accepted for a mortgage based on 3.5 times salary (excluding side hustle)?

What’s the nature of side hustle... is it MLM or different (if MLM then I would discount). How likely do you see this as remaining/growing?

Your earnings and outgoings are similar to ours. We are a family of 4.

We moved from a smaller to larger house and never factored in the big jump in gas and electricity.

Our mortgage is £700 and that would be my limit, so yes, I think 1200 will be a millstone unless you move there get the schools sorted and, if the house is bigger and nicer area etc it may appreciate in value far more than other properties, which might help you downsize again in 5 years?

@middleager

Your earnings and outgoings are similar to ours. We are a family of 4.

We moved from a smaller to larger house and never factored in the big jump in gas and electricity.

Our mortgage is £700 and that would be my limit, so yes, I think 1200 will be a millstone unless you move there get the schools sorted and, if the house is bigger and nicer area etc it may appreciate in value far more than other properties, which might help you downsize again in 5 years?

Actually ignore that! This is what we've done and I regret not staying in my old lovely but far cheaper house. We could have paid off the mortgage by now.

It's not necessarily up to you if you can afford it, you have to pass the lenders affordability criteria which is partly based on outgoings but there's also the general maximum salary multiple of around 4x salary.

Lenders and sites like money supermarket have calculators that you can play around with.

Your partner's income is very low - can they not find a way to increase that?

Impressed you overpay so much at the moment! Don't forget pensions in your calculations- money you save now whilst you're young will yield more in the long term than leaving it til later and then having to save a lot more.
I live in a modest home I a nice area. DD sometimes moans that we don't have a bigger home but I remind her we have holidays and a pleasant life and you can't always have everything.

I think it's unlikely that a bank would consider the mortgage to be affordable ( would they even count income from umyour side hustle?) so anyone else's opinion is pointless

We chose a smaller house, all our friends have much bigger ones and are stretched to the the Max. BUT I have a serious chronic illness that may affect earnings in the future, and we will be mortgage free by the time we are 50. When Covid hit, I cannot tell you the relief that came from being financially secure. It was like a fluffy blanket being wrapped around at a terrible time. We didn’t need to take a mortgage break like so many friends did.

Would you even get a mortgage that high with those incomes?

I regret not taking the leap sooner, our wages have increased and outgoings decreased so it's frustrating to have to move again now our situations changed, we were too risk averse. As a pp says your partner's income seems very low, do they have any plans to try to increase that?

How secure are your jobs?

We were all set to get our house ready to sell and start looking for something much bigger but Covid has just really thrown me. We are both lucky to still have our jobs and absolutely no mention of losing them (I was furloughed however) but I’m very concerned about what could happen over the next few months.

Where we live now we can comfortably afford it on one salary but if we moved it would be very tight in one. Similar total income to you and new mortgage would be £730ish but much higher council tax and presumably utilities too.

It could be cutting it fine. I have a mortgage of £1100 and take home just over your amount (inc your side hustle)

I have £300 a month allocated for spending money (so days out, takeaways, odd months essential bits for the house) and about £3-400 to save. However in what I class as my monthly bills I am allowing around £5-600 for annual expenses - this includes things like insurances, a pot for vet / car costs, Christmas and birthday pot, a set amount for clothes etc.

If these are not included in your monthly outgoings it would be tight - we dont really have enough to do holidays other than a short uk break etc. My kids moan they miss out on holidays but I had no choice if I wanted to retain house after divorce.

I’d do it if you are both in jobs where your salaries are likely to increase. Get the benefit now of a nice house.

A few questions.. what is the term of the mortgage? LTV and rate (and how long is that for).

If the LTV is high, it most likely will lead to a higher rate etc

One side of me wants to avoid risk and play it safe .
The other side says 'take the risk now and relax later '
'

We will be outing down a 20% deposit . The £1200 is based on 3.4 because of (one!) default payment ( something I didn't even know was there until I checked credit file)

So potentially in two years time :
I would earn £2000 , partner £1500 and we could get a better mortage date due to the default being much older

If I get the small house I would 100% be planning to move again in 5 years