Can we afford this house? What would you do?

[Enessie]

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?

@Enessie

The people I was referring to probably spent too much on the renovation and had too high a figure in their minds about what it was worth afterwards. They rejected an offer that was good but not good enough, a decision which they very much regret.

Oh, and the house was grade 2 listed, so all the renovations were expensive, time consuming, had to be done in a certain way, with certain materials in keeping with the style of the property and needed to be approved by the council.

I think by now you've probably decided this is not the house for you. I think you have to have a certain mindset to undergo significant renovations. Some people seem to relish it, and see it almost as a hobby. If that's you, that's fine. But it's also important to recognise that not everyone feels this way (I certainly don't) and not go down that path if DIY, choosing materials or dealing with contractors is something you'd rather do as little as possible of.

I think you have to have a certain mindset to undergo significant renovations. Some people seem to relish it, and see it almost as a hobby. If that's you, that's fine. But it's also important to recognise that not everyone feels this way (I certainly don't) and not go down that path if DIY, choosing materials or dealing with contractors is something you'd rather do as little as possible of.

Agree with this. I know a few people who have done renovations and they are all a similar sort of personality. This is my quiz to see if it is you:-

When sitting in a beautifully decorated room do you:-

(a) barely notice
(b) enjoy its loveliness
(c) think “I really must redecorate” and immediately start sending off for wallpaper samples.

Only (c)s should buy a renovation project.

(b)s should buy a house which only needs a few cosmetic things doing that they can do and be happy with

(a)s can buy anywhere that is structurally sound and then sell 20 years later to either bs or cs having lived with the lime green wallpaper quite happily and felt that they have been “very busy doing renovations” because they replaced a tap.

NB I am an A.

You say you didn't start working til your 30s which suggests you are in careers which require a long education and post graduate study?
Do you have the same aspirations for your children and could you support them in the new house?
Will they go through state education? Would you consider private if they encounter difficulties?
Just trying to establish how the house might impact your ability to make those decisions and where that sits with your priorities in life.
I think you may move at some stage but I'd be wary of whether now is the right time. I can understand the desire not to lose out in a rising market. It's always a risk but equally, this bubble could burst. Not spectacularly perhaps but it is often houses at the top that suffer most in relative terms
Is there a compromise to be had in staying for a year, saving what your new outgoings would be, and reviewing it then? Get a proper idea how you feel managing your finances

@Mumoftwoinprimary i am between (b) and (C) but i wont get up asking for wallpaper samples immediately. I will spend too long thinking how best to do the reno.. which eats into family time

@Mumoftwoinprimary that’s genius! I’m definitely a ‘c’ as we finished a full renovation a year ago and am now wondering if certain rooms should be different colours.

Hi Enessie

In answer to your question about surveys, our full survey didn't pick up the significant damp problems, structural issues such as differential settlement in the foundations and that the walls weren't tied together, or that 70% of the house had been rebuilt in the 1980s so wasn't Victorian as it appeared. We anticipated a £150k refurb and extension and are now in for £500k.

Worst of all, the survey couldn't have picked up these issues and wasn't actually negligent so we have no recourse. I'd hope our case was unusual but buying an old house is a risk. And buying a listed house is a bigger risk as any work that does need doing will cost twice as much or maybe more.

Lifestyle choice.

Beautiful house after spending ££££

Dedicate life to reno

Possibly have to sell up in retirement or rent out rooms create air b nb annex

If house being at home is main Lifestyle go for it.
If travel etc more important then different house

If uni loans stay the same
Your 2 dc will get enough loan to barely cover rent
So count on say 400 per month to each for 3 years or 5 if medicine
Plus their cars driving lessons etc
Uni equipment
Help with their deposit for housing?

Grade 2 listed???
You need to be aware of what might be involved

Do some posters not realise this was posted in Money Matters? The sneering about the OP having more money than others to spend is ridiculous.

I’d keep looking for a house within your budget. If need be, sell your home and temporarily go into rental so you are chain free and a cash buyer. The pressure to choose this house now is all because you have buyers.

And I do think you should be prioritising your pension, and children’s future over a much larger expensive house.

We are far from being a millionaire. This is very realistic dilemma for many middle income families who are taxed to death, don't get any benefit, and need to make plan that maximise financial gain for old age.

Just to be clear a household income of 155K means you are a high earning family, not middle income (by a big margin).

I think you will regret taking on this house. You want to continue to spend 5K a year on holidays which is an awful lot compared to many people. I think this tells us about your priorities which appear to be to continue to have many of the 'good things' in life. Nothing wrong with that but I think you would regret tieing up so much of your money in a house when you obviously value the life-style you can buy with large amounts of disposable income. Can you find an alternative house which is still lovely but more affordable?

I would stay and extend where you are and be mortgage free. As you admit, you've got caught up in FOMO and you are now looking at saddling yourselves with an enormous debt that you won't clear until your 70s.

Property at the moment is boiling over. You'd be buying at the top of a market which could cool down. Given the amount of instability at the moment I would take a much more cautious approach.

Also - it's not now or never. If you aren't genuinely overcrowded you could extend and then look again at what the market is doing in a couple of years. It may have adjusted in your favour.

On your salaries, you could have a fantastic quality of life and brilliant retirement. I would prioritise this over having a bigger house if I were in your position.

10 to 20k per year? Wow.. But sound like your house is much bigger with acres of garden? Mine doesn't have a substantial plot

Our garden is just over an acre (though the pool we inherited with it adds quite a bit of cost). We pay for four hours gardening a week which isn't enough really, plus four hours for a cleaner. It's not a country estate with acres of land but the carrying cost really adds up.

We bought a do-upper (though not listed) and spent around what you're planning on renovation costs. What perhaps we didn't factor in was that things break and deteriorate (particularly ten years on) so it was by no means a one off cost. It's that ongoing cost that becomes frustrating when you've invested a considerable amount in replumbing, electrics, driveway, patios etc. We appreciate that we are very fortunate to be able to afford to live in a large house but the annual cost of general maintenance is definitely worth bearing in mind.

We recently wavered on taking out a 30 year mortgage term and we are 27 and 28, not a chance in hell we would be signing a mortgage of that length of time in our forties

I've done a full reno on a Victorian house, NEVER AGAIN. Because it's so old it's just never quite right. Always some weird damp or smell or wonky bit that can't be fixed. Grade 2 listed I would run for the hills!

The relief of selling up and getting into an outdated 1960s semi was physical..!

I'm a single parent and my mortgage, Council tax and utilities is probably nearing 40% of take home. Had no choice if I wanted to retain house and it doesn't end until I'm 69.5.

I also worry about wanting to go part time etc when I'm early 60's. However

My children will have left home or if they haven't I would be expecting some contribution.
I can take 25% tax free lump sum from my pension - I should be able to retire earlier than state age and use the lump sum to pay off the remainder of the mortgage.

Go mortgage free as soon as you can. It feels wonderful instead of being in debt until you draw your pension or beyond.

You want to continue to spend 5K a year on holidays which is an awful lot compared to many people

5k is only one week skiiing for the middle class
Who may then have two weeks in Devon and mini breaks in Italy....
Look on the ski ing thread.
It s not a huge amount or huge holiday budget comparatively to the income.

OP: go back to basics.

You had a budget of up to £600k. Ok that needs to be stretched a bit, but there must be something, eventually / in due course in between £600k and £750k needing £150k-worth of work.

Your house v new house: good for secondary schools? Properly researched?

A 30 year mortgage v being mortgage free in 5 years?

Na. Thats stupid.

You can afford the house of this amount without going to a 30 year term. The fact you want to go for 30 years says a lot about your life style priorities and willingness to fund that off credit.

I think this should be a wakeup call tbh. Have a good look at what you actually are spending all your money on and how much money you are wasting.

Some poor financial considerations going on there I think.

Ah, grade 2 listed. You're going to need at least a cushion of 30 per cent on any quotes made for renovation on the property as the vast majority of the time with listed properties, large costs are going to be incurred both because of the time delay (waiting for permissions) and that extra work will emerge as they start on jobs.

I did a listed property renovation and would not do it again.

I wouldn’t do it, is the 2k “spare” each month after savings, food, travel costs the renovation?

Also, 5k per year for a family holiday for 4 isn’t going to get you much. Especially when you have 2 teens.

@MsMoppet

Hi Enessie

In answer to your question about surveys, our full survey didn't pick up the significant damp problems, structural issues such as differential settlement in the foundations and that the walls weren't tied together, or that 70% of the house had been rebuilt in the 1980s so wasn't Victorian as it appeared. We anticipated a £150k refurb and extension and are now in for £500k.

Worst of all, the survey couldn't have picked up these issues and wasn't actually negligent so we have no recourse. I'd hope our case was unusual but buying an old house is a risk. And buying a listed house is a bigger risk as any work that does need doing will cost twice as much or maybe more.

£500k?! that is shocking. I dont understand how the survey couldnt pick up issues such as damp and walls not being tied together

I'd say Iamthewombat on the first page has summed it up perfectly. Having done a renovation (much smaller than yours) with one kid, never again. Takes up far too much time and can be stressful if multi trades involved who you have to manage. Fast Forward to being nearly 50 and in a different house, that we bought nicely already done up, we have paid off the mortgage. That is such a relief. My pension is not great but that is the focus now.
Even if you enjoy your work, I can guarantee the thought of being able at some point to retire comfortably before state pension age is soooo worth going for. Also we still have teens at school to support and will do for a no. of years yet. We will have some flexibility to do that.

I'm afraid your plan sound like to much of a gamble. Grade 11 house that needs ££s renovations, which you can't afford yet, mortgage to 70, planning on house price inflation, yet not great pension provision and young kids still. I'd stay where you are, get nice extension, max out pensions, save for kids and have the opportunity to retire flexibly and when you want.