Upsizing but scared ! Please advise on my budget

[Rosmah1511]

We are thinking of moving to a bigger house in a better area but I am scared . Growing up my parents were very risk averse and played it safe and it's made me very anxious amount money. We never had enough.

So, a break down for the new house.

Mortgage amount £300,000

Joint income £2900
Mortgage £1200
All bills and food £700
Money left £500 x this by 12 months =£6000
Of this £6000
£1000 emergency fund
£2000 savings
£400 kids clothes
£400 cars mot/service

£400 birthdays
£1800 holiday

I also have a part time side job that earns me about £700 per month.

Have a missed anything ? Any other tips please ? I think the size of the Mortgage scares me more than anything .

I am terrified that I will move , not be able to make it work ( my current Mortage only is £500) and lose the house ! Anxiety is high :(

And to add I would have £15k savings in case one of us loses job

Is that your joint take home income or gross income? It will seem difficult from £500 each month to £1200. We pay £1100 each month but overpaying so could pay less and earn joint income of £6k gross. Can you get a long term fix on mortgage so you at least know it won't go up.in a couple of years if mortgage rates rise? My dd in similar situation a couple of years ago hot a 10 year fixed mortgage rate as she said it made it easier to budget when she knew how much it would be. You forgot Xmas on your list of outgoings, plus other sundries like hair cuts, ice creams and school donations, non uniform days, gifts. You can expect a pay rise most years. The first 5 years of a new mortgage are always hard but after that it gets easier.

Would the all bills bit cover clothes for you and dh and things like dentist bills for example?

What about days out? Or kids clubs. Are these something you would normally do? (I realise we cant do this at the moment).

Does the car money include petrol. Sometimes a hefty service can set you back £600 on an older car.

@caringcarer Thank you for replying. It's joint take home income. My salary should rise by £200 per month each year for the next 5 years and I and a trainee at the moment

@RoseMartha Days out and kids clubs would be paid from a separate account (my parents pay into it for the kids )

Hair cuts etc would be extra so I should include them somewhere. Thanks for remind me. bills include petrol too.

I know a car service can be £600 sometimes that is when I will dip into the emergency fund and maybe the £15k

Don't forget the community charge will be higher in a better area in a bigger house. Mine are extortionate

The trouble is any replies (including mine) will reflect our own risk aversion too.

The first thing that jumps out at me is 300k looks like a huge multiplier on your income - is that right? Also I'm sure you've done the calcs and I know I haven't, but I think repayments on that much would only be as "low" as £1200 if the interest rate were very low. What would the figures be at more "normal" interest rates than we have right now?

I could quibble with your budgets for gifts, clothing and cars but you are projecting a chunk of savings so you'd have that safety net. However just to play devil's advocate are you allowing for Christmas gifts for all, children's party gifts, say 3 pairs of shoes per child per year (probably more), car repairs/loan/replacement. Children get much more expensive as they get older

Sorry, clearly crossposted

If you need to move for an extra bedroom or closer to work or better schools then I would go for it but I would definitely get a 10 year fixed mortgage that way you know rates can't just zoom up and catch you out.

I also think you have underestimated your expenses. House maintenance? Garden? Any new furniture or renovation work on new house?
I'm not saying font do it - I would. But I think you have left out a lot of expenses. How old are your kids? They get more expensive, especially as teens!

You haven’t did how many dc you have or their ages. DS needed shoes twice within six weeks one year as his feet grew so rapidly plus he played football so needed boots x2.

Many don’t have a choice with housing and I can see why you are nervous. Myself and my friend have paid off our mortgages. The difference was she did move in to a rather grand house so spent years without a bean to do anything else but be at home in her rather lovely house as she over stretched herself.

Your mortgage alone is 41% of your income, that would be far too high for me. I haven’t added the the extra income but is working two jobs sustainable and how safe are the jobs you have?

Agree with everything Murmurer has pointed out, particularly with low interest rates and the mortgage multiplier, that does seem exceptionally high.

Hope this doesn’t come across rude as it’s not meant to, £700 for bills and shopping seems super low, if you’re moving to a bigger property there will be higher associated costs.

I might have read your budget wrong but there seems to be £500 surplus from Joint Income in your workings, plus £700p/month?

Joint income £2900
Mortgage £1200
All bills and food £700
Money left £500 x this by 12 months =£6000

We earn a bit more with a lower mortgage, at current interest rates we’ve just fixed again, borrowed a bit extra for home improvements and reduced the original term by 8 years, it’s still £70 cheaper than what we were paying, (around 5%) so the previous rate was not particularly high to begin with, we’d fixed at that thinking rates wouldn’t go much lower, how wrong were we? Interest can have a huge impact on repayments. There is a mortgage interest calculator on the BBC Website, it’ll give you a good idea of what your repayments will be at different rates.

With historically low rates and uncertainty at the moment I would be cautious and advise against over stretching.

Maybe give it 12 months to see what the market does and live like you were paying for the extra council tax, utilities, insurance and mortgage etc, you might choose to put the cash up for your deposit, fees or home improvements and see how you go?

We have lots of little discretionary spends that add up, keep an eye on these and be realistic about what you can and cannot do without.

Sounds risky. Lots of ordinary expenses seem unaccounted for.

What happens if one of you loses a job?

Have you already secured your mortgage offer? Only asking as you have a slightly lower monthly income than DH & I and there is no way we would be able to get a mortgage for £300k.

I also think £700 a month for all bills including food seems low.

How are your bills so low? £700 for food and bills doesn't seem enough.

What about insurance, Christmas, holidays, white goods replacement? Other irregular expenses?

£400 per year for two cars seems low. £100 of that will be taken up by the MOT tests and you only need a couple of tyres and a smallish repair and that's the budget blown. What if something fairly major happened?

A good basic budget planner can be found here. It's aimed at people in debt, but don't worry about that, it's also useful to have a list of most things that you have to spend money on.

Agree that food and bills for a family seems low - council tax, gas and electric, water, broadband/tv incl licence would take a good chunk of that, you've also got cleaning products and toiletries to account for as well as food.

If you want to go into a bit more detail, the MSE money make over gives pointers to cutting costs in each area, so you can minimise bills and leave more spare money left over to spend or save.
www.moneysavingexpert.com/family/money-help/

Also don't forget things like car tax, breakdown cover etc.

Have you applied for the mortgage yet? They will want to review your finances to see if you can afford a bigger mortgage and stress test you to a higher interest rate. The part time job may or may not be taken into account depending on whether that's a reliable income.

I would do a proper SOA (statement of affairs - google one) and try to be really accurate. This will make sure you have included everything. The round figures suggest that maybe you have thought 'that's about what we spend'. Go back through your bank statements and check as many of the figures as you can. Maybe use an app like You Need A Budget to really see where your money goes. Do you currently have £700 a month to spare? That's just the difference in mortgage. Bills will all be higher.

I would get yourself over to money saving expert (the Martin Lewis website) and asm the people there. They have a huge amount of knowledge and are really helpful.

Being risk averse can just mean you are sensible!

Ask, not asm!

@Rosmah1511
Thats really nice your parents help out with things like that.

It is also good your wage will be increasing regularly.

I too like some other posters would be more cautious at this current time about over stretching myself though.

It is okay if a couple of things require you to dip into your emergency fund, and you will be topping this up. But some of your outgoings seem a bit low.

Have you factored in moving costs? And general rising living costs?
And can you manage all bills and food on £700? I know it can be done as I spend less (but I probably have smaller family and certainly a smaller and cheaper home).

I have spent a lot of time over the last three years number crunching on my budget and I found I need to give myself a little extra on bills, car and food etc because sometimes things cost more than I originally catered for.

Would it be possible to upgrade but spend a little less on your next property?
To give you a bigger margin for other things.

Things I have been caught out by in the last month (some tiny, some not but all add up)

Rising food costs
Bus fares
Broken small appliances
National trust membership
Car tyres
Car parking
Newspapers

All things I hadn't budgeted enough for.
Your birthday amount - does that include Christmas? We are incredibly frugal and just about manage Christmas on £300. Kids birthdays probably £75 each including wrapping paper and cards. £5 every time they go to someone else's party. Their birthday parties - about £50 depending on activity.

Have you costed in increased insurance costs for home, life insurance etc to cover mortgage should something happen, increased heating costs and council tax? £700 for bills and food seems incredibly low. My bills on a much lower value property are more than £700 before food.

I would go for it on those figures, particularly with your side job. Our mortgage (overall and monthly) is higher than that though as we upsized a couple years ago. A bigger house in a better area is often worth it IMO. The only thing I would question is how secure are your jobs?

Sorry , some clarifications

I have two children , 10 and 5
ALL bills are £1200 NOT £700 sorry !

Car break down/appliance breakdown/house repair etc would be covered in the emergency Fung if £1000

When we sell we will put £15k into savings and £10 for house Reno etc

Our jobs are pretty secure .

We are not moving just a bigger house but for catchment. That is why I am even considering this :(

I know we will have to budget really well and stick to it.

Your emergency fund and savings are much too low at £3,000 a year. You need to put aside savings to replace your cars when they go, house and garden maintenance, repairs, updating kitchen & bathroom, new carpets, repainting etc...

That's not considering breakdown of cars, replacing white goods.

have you sat down and worked out how much you will repay over the lifetime of your mortgage with and without the £15k

have you sat and worked out how much interest you would save if you over paid by just £50 per month?