Is it a stupid time to commit to buying our first house? £700k

[FirstTimeMaybes]

Would love some input from strangers please as I don't like talking finances much with friends and family.

Due to a large inheritance we're in the position to be able to buy a home here in the London commuter zone where up until now we've not had the deposit to afford it.

But with mortgage rates what they are and the economy what it is I'd love the opinions and advice of MNers.

We will of course take our IFAs advice on everything but nice to hear from people who aren't going to benefit.

---

We'll need to spend around £700k to get a home that we're happy with.

We have approximately £500k deposit.

First time buyers. Earn £55k between us with the majority (over 3/4) of it earned by DH who will get pay rises quite frequently.

Not paying any child care. Currently paying £1200/month rent.

House we like at the moment costs £675k. But could easily add an additional bedroom/bathroom which would add value.

(We wouldn't need to cut into the deposit money to pay for the extra work. As the inheritance is from my dad dying and my mum is considering selling her home and then living with us so she would fund the extension and it would be her new bedroom/bathroom etc.)

Thanks in advance to anyone with any input.

Borrowing 200k on 55k shouldn't be an issue. The mortgage should cost around the same as your rent.

I assume you have factored in stamp duty?

Why would it be a stupid time?

You have a huge deposit that won’t guarantee you much if you put it in savings, and the value could well be diminished by inflation.

Buying a house will give you a £700k house for a £200k mortgage, with repayments that will probably be cheaper than your rent.

Do you actually want your Mum to come and live with you?

It sounds like a sensible idea- you have a substantial deposit. Your mum is contributing to the extension…. Even with rising interest rates I’d imagine you’d be paying less on a mortgage than rent? plus it’s not money down the drain in terms of equity like renting is.

The only thing I would question is what happens if your mum is living with you & needs care. Does she have other savings? An extension could be a lot of money.

You’ve got a massive deposit.The inheritance will give you a chance at a property you’d otherwise have struggled to have ever afforded on your household income. Even at 5% the mortgage over 25 years would be less than your rent at that sort of level.

The bigger issue is whether you definitely want to move your mum in and the financial arrangements around that especially if she invests in your property. Would she become a joint owner? How would her money be protected if she funds the extension etc?

Thanks all.

Replies are what I was hoping to hear and what vet been saying to ourselves. But wanted to keep the OP neutral in case there was a big financial negative we were failing to consider.

Yes. We want my mum with us (as much as anyone wants to live with their parent/in law) as it goes anyway I have to talk to her daily/help with appointments/help with bills etc etc.

At least living together I won't be dealing with her bills etc as she won't have any. Plus the benefits of a live in child/pet sitter.

My take is always - can you afford the mortgage just on one salary if you really needed to. If so then that's as future proof as you can be.

How old is your mum? Is the £500k inheritance money purely from your dad, and it’s not from you selling your home.

Just wondering if at some point she has to go into a care home in the future how would that be funded? We both are dealing with this now and that’s why I’m asking the question.

Would it be suitable for a downstairs bedroom and bathroom if your Mum had reduced mobility?

Thanks all.

Mum is early 60s. Still incredibly active and mobile.

But yes the house we like currently already has a downstairs bathroom.

And we're only considering places with at least 2 downstairs reception rooms in addition to a kitchen diner/dining room so that we have two lounges so if necessary mums lounge could always be a bedroom if necessary but fingers crossed that's a very long time away.

Early 60s? Still working age? Hardly incredible that she is active and mobile!

She could have another 30 years or more.

Is it really practical to combine yours and hers finances at this stage?

What if you need to move for work? What if she meets a new partner and wants her money back to live independently with him? What if (gif forbid) something happened to you?

Downsizing is one thing.

Be really careful about making huge decisions when everyone is struggling and grieving.

If your Mum dies out her money into your house take lots of legal / financial advice about future implications of IHT, her potential care options, would she co-own or would it be a gift? In which case what if (again, god forbid) what if you divorced? Financial and legal arrangements always need to be made to protect against worst case scenarios.

I second early 60s!!!!!!

helping with a few appointments and setting up a direct debit is not the same as having them live with you 30 years, ten of which they may end up needing 24 hour care.

do you have the inheritance of 500k or is it really mums and she is grieving, suggesting giving it you early and moving in?

What would you do if:
you and your DH divorced and he wanted half the equity?
your DM lived until 95 plus and needed 24 hour care?
you wanted to move house?
your DM didn’t like living with you or met another man and wanted to sell up and take out some equity to start again?

Why does your mother, who is still of working age, need help with appointments and bills? Is it just a bit of temporary support due to her recent bereavement or something else?

Is this really an inheritance or is it your mum not wanting to be alone and selling her house and giving you the money so she can live with you?

If she’s early 60s, she could have another 30+ years left yet, you have no idea what her health will be like in the future, you could end up doing round the clock care for her for 10+ years. Things can change very quickly with elderly people, people who were once fit and independent can end up needing significant levels of care in the space of a few years or even less. I personally would not do this unless you’re happy to sign up to being her full time carer in the future.

Is the money net of tax? £500k 'could' be liable if inhertiance tax.

The £500k is totally separate from the value of my mum's property and she has cash of her own.

She needn't sell her place at all if she decides she doesn't want to. But it's her preference.

She would then have the cash from the sale of her home added to her savings/pension/Dad's money. So if she did live with us then she could use her money to pay for works to extend the house for her benefit whilst living in it.

The £500k deposit + any mortgage we get on top will not need to go to my mum.

Is living together is beneficial to both parties both financially and socially. With some obvious exceptions but also there are downsides to us living separately as we do currently.

Everyone aghast at my "incredibly active" comment is seeing it from the wrong angle. None of her friends/siblings of the same age are as physically active still as she is. And obviously having lost my second parent who was the same age to a horrible illness in comparison to that I see and am grateful so how much she has ahead of her.

She won't work again and has a LOT of travel planned. So not needing to worry about her home while she's away is another benefit.

Bills/finances she has never had to handle as was always my dad who sorted everything. Hence why I am having to step in anyway. As she's also a technophobe.

Well house prices are probably going to go down next year, I’ve seen 20% fall estimated for London. But who knows? If you’re not planning on selling /moving does it matter? I mean in an ideal world you’d wait and buy the same house for 20% less in six months but if the experts are wrong you’ll be kicking yourself.

I wouldn't worry about buying if you are planning to live there in the medium to long term, any downturn in prices is likely to reverse itself sooner or later.

I bought in March 2020 as everyone was going into lockdown and no-one knew what would happen with house prices - but it ticked all the boxes, has good transport inks, and DD is still at school so I wasn't planning to move within the decade (barring something completely unforeseen - and if all goes according to plan I will be here 20-30 years!).

With your Mum moving in, I would be a bit more cautious. Can you arrange it so the extension is a self-contained flat?

I get what you mean about the helping with appointments, daily chats etc, we chose this area to be close to my Mum to do all that (though she is in her 80s not 60s!), but we definitely need to live in separate dwellings! A self-contained flat on the same premises might give everyone that bit more space while getting all the benefits of living together.

One aspect to consider is maintenance costs for the house will be for a £700k house not for a £200k - £250k house which your income would afford without the inheritance.

Personally I would not buy a house that maxes the inheritance and also your income multiple affordability, one wrong move or interest rates keep rising and you will very quickly find yourself house poor.

If £ is coming from your mum you need to be careful about inheritance tax - if she dies within 7 years you may need to pay back 40%.

ensure you ring fence your 500k

I'd worry as you're both low earners tbh. 55k between two people in London is extremely low.

And yes remember the inheritance tax. DP patents have been filtering us money since their early 60s to avoid paying.

Early 60s isn't even retirement age. As others have said, your mum.could live with you for the next 30 years. How does your DP feel about it?

I'm.sorry you've lost your dad. My dad died 4 years ago. Last year my Mum started a new relationship and moved in with her new partner. She's 80. I know it's probably the last thing in her mind at the moment, but your mum might meet someone in the next few years and want to move in with them.

I think buying a house is a good idea. I also think you and your partner need to be very careful before agreeing that your mum should invest in your house and live with you.

I'd wait until Spring 2023 to look. Houses prices are going down. More houses hit the market in Spring. Hopefully you will have more property to choose from...with 500k cash you might be able to pick up what you want without even getting a mortgage.