Can we afford this house?

[peonyjam]

We have been house hunting for quite a long time in a very competitive market and have come second at closing dates several times. We are coming to terms with the fact that we are going to have to pay more than we really wanted to. This is in Scotland so it is the offers over home report system.

We have been looking at 'fixer upper' houses because that is what has been coming to the market there and are prepared to renovate. A house has come on the market that requires no work and no immediate repairs. I don't love that we wouldn't get to choose the kitchen etc but it is extremely nice and with the cost of any building work and a small toddler I can see the benefits of this. But houses in this condition are very very competitive and likely will require 10%+ over the home report value, eating into our deposit.

We have had a low mortgage on a small flat for a long time and psychologically the jump is feeling very difficult. We have completely outgrown this flat and we really need to move this year.

A rough budget:

Income - £4500 a month
New mortgage - £1100
Childcare - £600
New council tax - £250

I have a full budget detailing everything else but we don't have any debt apart from student loans, we have one older car owned outright. We are anticipating a modest increase in income in the next year.

Does this sound realistic? Should we lower our sights? Our childcare costs will ease towards the end of next year when we will get some funded hours.

I think with bills (insurance etc) that’s around 2k a month plus childcare. Leaves you £1900 a month for food shopping, clothing, petrol, holiday savings, savings, presents. I think you should be ok if you budget properly and keep a small savings pot.

To consider: will you have a second child and will childcare costs rise again?

Personally with a toddler I wouldn’t want a fixer upper. You are also likely to spend more than first budgeted/predicted.

Hello - also in Scotland, so appreciate the uncertainty of the system, and made a similar jump. That looks to me a relatively low mortgage for a family home.
questions I’d be asking: Is this a longterm house for you? Future proof in terms of school catchments, space to grow if more kids might be on cards? Minimising jumps up ‘the ladder’ is most cost effective, and less stressfûl, so that’s always my priority.

It will be tight but at yiur life stage I think you are much better to buy a house that you can move into and without the need to do it up. Bear in mind the doing up often takes twice as long and costs twice as much so you might not be making any savings and will have a more stressful time when you could be enjoying your child and early family life.

It sounds fine to me.

I have found the uncertainty very stressful. We have a really good amount of equity in the flat and some savings but ultimately it is a modest 3 bedroom semi we are trying to buy. At the moment a second baby isn't on the cards. I had severe hyperemesis in my first pregnancy but we do have this in the back of our minds so there would be space for another if it ever happened. It is in the catchment for a very desirable school and I think that is what is driving the prices up unfortunately. Those are all really good points to think about, thank you.

We renovated our current flat pre baby and I totally agree! It was stressful enough then and I was fully working from home during a lot of it. It would be a lot harder to manage now. And the cost of materials has gone up so much it really does make me nervous of taking on a house we ultimately couldn't afford to get to a decent standard. At least we will know what this house will cost us!

I wouldn't buy a fixer upper- these are often not much cheaper than 'done' houses these days. We bought one just before prices rocketed, and with the now high costs of materials and labour it's been a slow and frustrating process getting things put right. There has been a surprise cost or extra problem to solve in nearly every job we have had done.

This is near identical to us. Our income is £200 more a month, but so is our mortgage. Childcare and council tax costs the same. Also no debt except student loans.

It's absolutely fine. We save around 400 a month - not tonnes, but more than nothing. Manage to do nice things with our son, eat out etc, pay for him to do activities etc. We don't spend much on ourselves - clothes always from charity shops, and that is the main area where the budget feels tight.

That is really reassuring to hear thank you so much. I have worried our son might miss out on some activities or we would not be able to eat out. Around £400 is what I had put the budget and hoped to be able to save. I have been quite guilty of overspending on clothes in the past but have tried to shop more on Vinted etc. these days. I suppose there is just no getting away from the fact that with childcare fees it is an expensive stage in life.

It's not a ratio I'd be completely comfortable with, but if it meant not having to get a fixer upper I'd push my budget to it. Would want to consider future wage prospects, children etc too though.

I think it sounds very do-able - the mortgage repayments would only be one quarter of your monthly income so I really don't see the issue. When we bought our last house our mortgage was around 70% of our joint income and the interest rate was 18% at the time we moved, although we didn't have childcare costs to think about. It sounds the perfect house for you - you said it doesn't need any immediate work so you will be able to live in it comfortably and gradually make any changes when it suits you, and not straight away because it's essential.

Thank you. I guess I am not totally comfortable with it either. Can I ask just out of interest, what would you be comfortable with in terms of ratio?

I am the higher earner and actually only work 4 days at the moment so my income will increase when I move up to full time. I am working towards promotion but it is realistically several years off for me.

Thank you. That is so tough! My god! Really puts it into perspective, even without childcare fees.

We are currently purchasing and have very similar numbers:

Income: £4350
New mortgage: £1140
Childcare: £900 (two kids)
New council tax: £270
Other bills: £500

Which leaves us about £1500 to actually live on (plus child benefit). We've crunched the numbers so many times and acknowledge that the next 18 months might be a bit lean until our eldest starts school but I think it works and I think it's worth stretching ourselves to get this much bigger house that we'll stay in until the kids move out. We renovated the house we're in before the kids came along and I would not want to do it again with them around!

That is understandable. The dust! Nursery fees are a killer but that is great that the end is in sight for you and I'm sure you will be so glad you went for it with the house.

Given everything you have shared I would be ok with that ratio. Especially as childcare bills will go down significantly (you still have to budget more sports, activities, holiday clubs as kids get older). £400 a month saving is also quite good.

Thank you everyone, I really appreciate hearing people's thoughts and experiences. I feel quite reassured. To the previous poster, I think £400 is maybe a bit idealistic if I'm really honest with myself, I think it would be the choice between a family holiday and some savings. But hopefully that will ease up once childcare reduced and (hopefully) incomes increase a bit.

This is very similar to us when we moved from a modest 3 bed to a much bigger 4 bed, 5 years ago, when our 3 children were tiny.
It has been absolutely fine. Once we stopped paying for childcare we were able to overpay the mortgage.