How much?!

[housetohome8]

We have had our appointment with the mortgage advisor and we can lend just shy of £500k. We don’t need to lend that much and we are looking at borrowing £300k.

I thought this was a fairly average amount to lend but monthly repayments on a 20 year term will be £1850. That seems insane?!

I am not sure what my question is but surely people don’t have mortgages this high? What are people doing to reduce it? Longer term?

Yes I found the lenders will lend a ridiculous amount that we wouldn’t actually be able to pay back monthly!

Interest rates have gone up hugely and so that’s why the monthly payment is so high.
I lowered the house prices I was looking for in the end as I didn’t want to rely on the rates changing as well as making sure if they go up further that we can afford it.
You may need to work it out again based on the interest rates and stress test yourself.

Yes longer term - think the most common terms are between 25 - 35 years...

Extend to 25 or 30 and overpay if you want.... this gives optionality

That’s interesting! I’ll ask the mortgage advisor to give advice on this. I indicated we would want a 20 year term thinking that was the norm.

What's the interest rate you're offered?

£1850 looks high but if the term is as low as 20years then you're going to be contributing a large amount of capital too.

The broker should be able to explain how the numbers work and how things pan out if you go for a longer term. Would a longer term and the possibility of over paying appeal?

EDIT: I'm the second person to suggest longer term/overpay.

Even in the nineties when I last took out a mortgage the norm was 25 years but already being eased out by some lenders.

I took my first mortgage out 30 years ago and even then the norm was 25 years, so 20 years is very unusual.

borrow!
I think most people start with 25 years rather than 20 and some younger people do longer to make repayments in the early years more affordable - this can be particularly useful if you're on a career path that should result in pay rises or maybe have childcare costs etc that won't last forever.
Your only constraint on extending the mortgage term might be your age as many lenders won't offer you a mortgage that will last beyond retirement age (even though that's years away and you could have paid it off by then by over paying!)

I think it was 4.2%. It was only a quick chat so I had an idea of whether 300k was even doable before we start to look at properties. I was taken aback with the figures and should have pressed further and asked questions.

I am going to ask for figures for 30 and 35 years and overpay. We could easily pay the mortgage at the higher end but I’d rather continue my investments at the current pace so I can retire early.

Thats good to know! We are 30 so a longer term should be doable although I suspect 30 years would be maximum - I’ll look into this further.

I think people have very high mortgage payments generally, despite the term. We have a £600k very average 3 bed semidetached house, put down £250k and it’s still over £2k a month. I hate to think how much people have borrowed for larger homes in our area.

Def look at the term, u can always bring the term down when you are able to. That monthly amount seems about right though for £300k mortgage over 20yrs.
When I got my first mortgage at age 22 the norm was 25yrs. We did 35yrs as we were so young and didn’t know how much all of our bills would be. We brought it down to 30 after the initial 2yr deal.

The sooner you pay it off, the less it costs you.

I found this too years ago. We didn't max ours out and it's a good job since the interest rates have gone up since.

Ours is £1800 over 30 years (until we are 68) mortgage is £360k. Thankfully our house is quite nice as we’re in a cheaper area so that takes the sting out! It’s less than 25% of our take home, and I have no intentions of still paying it in our 60s, but wanted the payments to be more comfortable while raising a family, we’ll up the payments when they leave!

I think 30 years seems more sensible. We will have to pay it off before then as we want to retire at 55! 🤣

I feel better already knowing that upping the term is entirely normal.

Seems fairly normal to me. My mortgage is just over £1k per month, but I pay that on my own. If I was renting then it would be more.

DP has his own property and his own mortgage, but at some point we will buy a bigger property together and I would expect the mortgage to be around 2k per month.

It’s funny, I’d have no issue with paying £1k on my own but somehow £2k as a couple felt insane. I think it probably boils down to what I thought people paid rather than affordability or anything else really!

It would be £1,250 a month to repay it even if you had zero interest over 20 years.

Check on TnCs with our mortgage we can pay:-

Overpayments that reduce the terms but and save interest but do not reduced the monthly payments

Paying an amount 3x monthly payment reduced the monthly going forward

Can pay up to 10% of remaining balance penalty free per year

Can pay up to 90% of the remaining balance within 30 days of a mortgage product ending- when your fixed rate product is due to expire for example

The above ways have enabled us to overpay and save interest. We will be retiring slightly early due to this.

Ive noticed some off set mortgage products have no early repayment charges but do have slightly higher rates of interest

In terms of boring less we waited a long time to buy our forever home and missed a house move out of the ‘ladder’ and saved a larger deposit of 15%.

The house we now own is a large 4 bed in a v quiet area. But I think we could have been happier with a smaller property.

Please think long term about balancing your house purchase against saving for retirement via pension/ISAs etc as houses don’t get the returns the once did during the boom years and are not reliable to retirement income. I wished we had considered this more when making big financial decisions

When we last remortgaged we were asked what term we wanted. We could have taken up to 30 years but at the time that would have meant DH (older than me) being past retirement age so we opted for a shorter term. The broker said lots of people are going for 30+ year terms since interest rates went up.

All very good points! We plan on retiring early so we will look to have a longer term so we can continue to invest at the same pace we do now. We are planning to do the same as you, skip a house on the ladder and go straight to our “forever” home. It is so expensive to move and so we are jumping straight into it. We have a very good deposit so that definitely helps!

Who are you lending it to?

My friend has payments of £1500 a month. They extended the term until she was 75 years old to bring it down that ‘low’. Blows my mind.

Wow! I imagine that’s a 40+ year term? Or perhaps different age and amount borrowed but still!

We made some compromises and stuck to location first. We have took our time to refurbish the house.