A bit of background: me and dh are in our 40s. We have 2 primary school aged dc in state school. Our joint income is 155k so roughly £8600 post tax per month. Current mortgage is small.
Our current house is fine, and can be easily extrnded to create another room or two. During the lock down we suddenly need to create 2 home offices in the house and this nudged us to move to a bigger house, plus we got caught up in this house craze and FOMO as we witness house price increases week by week.
So, long story short, we put our house on the market and sold quickly. However the hunt for our next house hasn't gone so smoothly. When we started looking, we had in mind the budget of of 500-600k, but this has been pushed up many notches after we lost a few bidding wars. Houses that fit our requirements don't come up often in the small area we are considering.
Sorry for being long winded. So after many months of searching, we are committed to buy one at 750k, it is much bigger than what we set out to buy but is a real beauty. It still needs about 150k of renovation
So my questions is:
If we buy this house, the estimated house related bill (mortgage payment + council tax + utilities + home insurance) will be around £2200. Both me and dh only started working in early 30s so our pension is not an encouraging sight. We started in recent years to put everything over £50k into sipp. So effectively our salaries in only £50k each, i.e. around £6300 in total per month. So the house bill is over 1/3 of our income. Do you think that is manageable or a bit tight?
Our other household expenses amount to about £2+k, so technically, if nothing goes wrong, we should have about £2k spare each month. As mentioned, the house needs renovation, we only have £40k for renovation now so the other £100+k will need to be saved over the years to carry out the work in stages. Meaning that we won't be able to overpay the mortgage for at least the first 5 years. The renovation costs could also rise as material and labour cost rise.
Our mortgage term is 30 years. Meaning that if we don't overpay, this will take us into 70s. My question is, are we too old to take on such a big debt? 30 years is a long time and anything can happen. We have never been our of work but hey who can guarantee the same for the future.
If we don't buy this house, we can be pretty much mortgage free in 5 years time. Dh has to go back to office soon and now only need 1 wfh day. So, we could play it safe and stay and extend. However, my house is a bog standard 1930s house and after the extension would have reached the ceiling value of the street. The new house is oozing with features and characters. I am also thinking if it makes more financial return if we buy the big house. When we are old and want to downsize, the big house would have appreciated more in value.
Sorry for being so long winded and rambling away. What would you do? Bite the bullet and buy the new house, saddled with a 30 years mortgage but gained a dream home, or stay and be mortgage free in 5 years?