Should/could we take on a bigger mortgage or is it too risky

[Creditschmedit]

I will give rough numbers here for context as I think it’s too difficult to answer without them but I’m rounding up/down a little for the sake of ease. Sorry for length but detail needed I think.

We currently live in a 3 bed semi worth around 500k (south east) with an outstanding mortgage of 280k. We have 3DC and are rapidly outgrowing it particularly the bedroom space. We have viewed some properties and are looking to move to a 4 bed priced at 600k. However we’d need to release some money to fund the move as we don’t currently have a huge amount in savings - around 8k - as I’ve just finished Mat leave. Therefore to move we’d need to add approx 120k to the mortgage.

We’re currently still on a very low fix rate of around 1.8% that is due to finish sept 2025. Therefore our mortgage broker is saying that we’d be best off porting our current mortgage for the 280k and getting an additional 1 year mortgage to cover the additional borrowing of 120k and then when our low fixed rate ends, get a new mortgage to cover the entire borrowing.

I can’t help but be really worried about mortgage rates going up in the meantime though and then being in a position where we are taking out a mortgage we can’t comfortably afford. We have been on a low rate for such a long time that we have got really used to our mortgage never being a worry.

Some more numbers for context:
Current combined take home pay is just over 6k after pensions and student loan
The current mortgage is only £1080. Once our low rate ends, if we get a new rate of around 4.5% then this will already increase to £1450 if we don’t move. If we do move then it would be around £2k per month assuming we’re on a 4.5% rate.

In terms of other outgoings, I won’t list them all but we do have 3DC and two cars (one we bought outright and one that has a payment of £250 a month for the next 3 years). Usual other expenses of council tax, bills, food, general life. We actually don’t spend much in childcare due to flexible working, family help and the 30 hours funding. No other debt apart from DHs student loan which he is on track to pay off within two years. The affordability calculators tell us we can borrow up to £460k so we are well within that at 400k. I do also have scope to increase my income if needed as I’m part time and employer would like me to increase my hours if possible, although we’d have to spend a fair bit more on childcare if we did this particularly during school holidays so Im not sure it would be entirely worth it.

I use a zero based budget and save for irregular costs such as car MOT in sinking funds throughout the year and I’ve calculated that on the new mortgage rate from sept 2025 we would save around £800 per month if we move but if we don’t then this would be £1400. However this all assumes that interest rates will still be 4.5% ish in sept 2025 and current world events etc are making me nervous about rates going through the roof and then being stuck already living in a house that we can’t afford. WWYD? Thanks for any advice. I know no one has a crystal ball but just not sure whether it’s an unnecessary risk.

(usual disclaimers - I have posted this in money not in AIBU so I’m hoping not to get a load of people saying how I’m just lucky to be able to save anything etc etc - I’m aware of this. What I’m asking is whether it seems sensible/financially risky or not to move and take on a bigger mortgage. We both have FTE salaries of over 60k so are very fortunate but also therefore really should be in a position to save a healthy amount each month)

Truth is, it's 428am so I'm not really following. However, it sounds affordable on a month to monthly basis because you can increase your hours. Most people will get pay rises that accompany any inflationary & interest rate rises, too. I suppose main thing is making sure you have insurance on anything that could be very expensive, like if one of your cars developed severe mechanical fault, how would you manage then?

We have similar income to you of £6000 and are looking at moving house, currently £475k, house we’ve offered on £550k. Our new mortgage will be £2000 a month up from £1600. We do only have one child though.

After bills etc. we’d be left with £1400 a month. So we are just going to do it! We want another child, nursery years will be tight, but worth it to move from a 3 bed to 4 bed.

We also have neighbour issues which is what is swaying me really. Would’ve liked to do another couple years here but oh well.

As you have flex - you could work FT if push comes to shove - and interest rates are on their way down, I would go for it

Have you ruled out improving current home to fit you better? Knocking down walls or building an extension could be a possibility?

We do have the space to create a two storey extension to get another bedroom and en-suite but all the estimates we’ve had suggest this would cost a lot more than £120k. In the south east building work is incredibly expensive plus the cost of materials is going up and up. Even the builders agreed that financially it makes more sense to move.

If you go full time though, your family income will exceed the £100k limit on eligibility for funded hours, so that is not worth doing until your youngest is in school.

It’s not a family limit it’s an individual limit I think?

You're correct it's an individual limit for childcare, not family income

workingfamilies.org.uk/articles/free-childcare-for-children-aged-9-months-to-4-years-old/

Also my full time salary is around 65k but my employer uses a salary sacrifice scheme for pension so after that it comes down to around 59.5k so we would still get child benefit. Same for my husband.

I don’t think 2k is crazy for a 6k income but 3 dc are quite expensive so I guess it depends on lifestyle.

Have you considered a loft conversion? Mine, including a bathroom, plastering, painting, everything basically (SE London, a year ago) was £85k. Would have been less but I went for expensive tiles, solid wood floor etc. Just thinking that otherwise there’s the £100k extra cost of the new house, plus £20k stamp duty, plus two lots of legal fees, plus estate agent fees, plus moving costs, and anything you need to do to the new house. That’s going to be about £140k, or for say £100k you could have a loft conversion where you are, plus solar panels and battery storage to help reduce your bills?

Remember to take stamp duty and moving costs into account.

Rates should be lower by the time you refinance next year. But you also have some scope to increase earnings if needed. My only concern would be how low your savings are at the moment. If you’ve been paying £1k a month on your mortgage up til now, where has the rest of your income gone?! Are you confident you’ll be able to make the lifestyle changes needed to pay double the mortgage cost AND save a reasonable amount monthly?

I think my main concern would be the 3 kids (not suggesting you send one back ), especially as you don't have much childcare costs right now so it's not like they're going to get cheaper. For me £2000 mortgage out of £6000 income wouldn't afford me the lifestyle I wanted, but presumably you've weighed up the lifestyle you're happy with when going for a 3rd child. I assume if you're not looking to holiday a lot then it should be fine. I think with 2 kids it would be fine, with 3 you might need to cut your cloth more.

We did consider this but the layout of our upstairs means that we’d effectively lose a bedroom to make space for the stairs, which would defeat the purpose.

I have just finished maternity leave so we have spent around 6k of savings on that as I have only been on SMP for 6 months. We also had to change our car when we had a third child and spent about £12k of savings on that. This third child has been very expensive 😂 and prior to that I had two maternity leaves in 2019 and 2021/22 so it’s not like I’ve been saving hundreds every month for years and years.

Yeah I know what you mean. To be honest we don’t spend a lot as a family. The big two do some activities/classes but we don’t do expensive outings as a family like trampoline parks, theme parks etc. I budget £450 a month for “fun spends” for the family including my husband and I and we never spend all of this. We spend a bit more on food, around £550-600 a month, as it’s a priority for us and we have a couple of dietary restrictions. We also don’t have expensive commutes which helps.

I also budget £3500 a year for holidays which doesn’t get you much in the school holidays but we mainly go camping and/or ferry to France and Airbnb. This year we did 10 days in France for £2500 including spending money.

(Just to be clear, when I say we could save £800 per month this would be on top of sinking funds for holidays, house repairs, car maintenance etc. £800 per month would be towards long term savings)

You have your answer. Go for the move!

It's all well and good saying you don't have expensive days out now, but that may change as the children grow.
A kid at secondary school will easily spend £20/week on lunches. X3 is £250/month!

Sorry but there’s no way I would let them spend £250 a month on lunch. Me and my husband take packed lunches and they could do.

They may get more expensive in some respects but we do also have control over how much we spend on them. At the moment they are only 5, 3 and 1.

Also consider house prices, houses prices in the SE are lowering so be careful with who you choose to sell with

Could you explain a bit more please? What do you mean by be careful who you sell with? Thanks