£450K inheritance for a deposit. How much should we comfortably borrow

[Secretservice009]

Hi name changed for this one. DP and I are long term renters but he has recently been left circa £500k by his late mum. His plan is to put £450k in a house for us (in both our names we are getting married early next year) and then we can borrow on top to get a big enough house for our blended family. Together we earn £150k after tax, we both have our own businesses. We are 49 so can only borrow for circa 21 years. There is a house we love at circa £750k (SE) monthly mortgage payments would be circa £2k a month. We have had a much lower rent renting from DP's uncle until now so aware we will need to budget and plan more going forwards. Would £2k a month until the age of 70 feel too high? Is it too risky with our ages or do you just sell it and when you need to? Will have approx £75k in savings remaining with our current savings and rest of inheritance. No other debt. Would be interested to hear how it has gone taking on a bigger mortgage at this sort of age thanks x ps I know it was a big inheritance but we would much have preferred if MIL was still here xx

Assuming your hobby isn’t burning £50 notes of bloody course £2k a month mortgage is affordable when you’re taking home £12k a months. FFS.

It was more about taking on that debt and having those payments until the age of 70. Sounds daunting to us!

Theres no way id commit to a mortgage until 70 with your deposit and income. 65 maybe, and then make overpayments. On your income I assume you will have very comfortable pension pots - so if you mortgage to 65 , make overpayments and use some pension lump sun to clear any remaining mortgage?

I work in mortgages and my recommendation is that you overpay what you can on the mortgage where possible. Generally you can overpay by up to 10% every year without incurring fees, this would be a great way of ensuring your mortgage finishes earlier than 70!

I wouldn't take out a mortgage until the age of 70 unless you're planning to work up to that age.

Unfortunately no great pensions to speak of! We have only just finished paying off our debt too. So that's why this is all v new to us x

The average % of take-home pay spent by first time buyers on their mortgage is 37%. Yours would be 16-17% if it's £2k and you take home about £12k. So that is much lower than average, and you also have considerably higher savings than the UK average (£19k per person, apparently). So not concerning sounding to me.

But - are either of you likely to want to slow down and earn less? How secure are your jobs? How much extravagant discretionary spending do you do?

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Sorry for the drip feed... Currently
No real pensions to speak of sadly
No debt all recently paid off
We earn more now than we have ever earnt but have only been earning this money for the last 3 years or so hence why we've been able to pay down the debt....

Thank you this is really helpful information.
We probably will want to slow down before 70.
I think budgeting and overpaying the mortgage would help us get there sooner.
Would everyone recommend we buy a less expensive house and save / invest / pay into pensions instead?

Is it a big house? What’s so great about it because it doesn’t sound like you have children so why the expensive house when you could buy something suitable for you old age with no mortgage. Are you renting now?

if you’ve no pension that that is a fucking nightmare, you’ll end up forced to sell your expensive house etc.

Many many people in their forties are currently mortgaged until 70s due to late arrival on property ladder.

I would take the borrowing and overpay your mortgage every month to get it paid off by then.

We have a blended family, three kids of our own at 8, 10 and 13 and DP has two older adults children who come and stay regularly. We like that this house has a big enough kitchen / diner for all of us and two lounges and two small studies for both of us! So enough space. The houses with this sort of arrangement tend to cost circa £700k plus around here.

Doesn’t “blended family “ indicate children?

OP I would be wary of that much debt, however you could downsize when kids have flown long before 70.

I wouldn’t want a commitment that meant I’d need to work until 70. Despite being in really good health there’s a huge difference between how I felt when I was mid-40s compared to late-50s and how long I wanted to work FT for.

I’d redo your sums and work towards finishing work at 65yrs, contributing more to your pensions, and/or borrowing less.

Overpay and start investing in pensions.
You can downsize later

We’re similar ages, my mortgage is around that, also to 70 but i plan to overpay to reduce the term once I’ve built my savings back up.
You’ll be fine on that combined salary.

You can get a shorter term mortgage with higher monthly repayments. It sounds like you can easily afford repayments in excess of 2k on your income. I'm pretty sure the last time we got a mortgage the term was set to my husband's intended retirement age so it was 17 years not 25 years. Then all your debt will be fine long before 70nor earlier depending on when you want to retire.

I would suggest you don’t rush into buying a house until you have really thought carefully about retirement, I would allocate some budget and time to financial education eg meaningful money academy, rebel finance school and do a session with a financial planner that can take into account your full circumstances and give you all the scenarios.

You need to have a plan for when you stop work, how to pay for maintaining a property (remember that the rent is the maximum you pay, the mortgage is the minimum you’ll pay as there will be expenses every year for upkeep), bigger properties = bigger utilities. Not buying too much house is going to be really important to your financial security, as is building up pensions. What if your income dips, or you get ill. You’re almost 50 so if you can fall in love with a smaller house, and invest in pension plans you could end up retired (work optional) at 65 with a paid off house and income guaranteed for life instead of a paid off big expensive to run house and no pensions at 70.

I probably wouldn't take a mortgage until 70, no. Just based on our parents' stamina for work in their late 60s. What would a 15 year mortgage cost for the same house? Do you have other big outgoings like school fees or horses?

Alternatively are there any nice houses closer to £400-500k that you could extend? We added an extra room onto our house and renovated and it was definitely cheaper than buying a place that didn't need work.

The beauty of such an inheritance would be to be mortgage free or only to have a very low mortgage.

We have seen seven houses now all in a similar price range. We could go smaller that wouldn't be an issue for me maybe that is something we should consider. I think my DP is relieved we can finally get somewhere he wants something big that doesn't need too much work doing to it. We definitely do need to see a financial adviser thank you for suggesting this I agree x

If you’re currently renting a house you are happy in from a family member, how much would it cost to buy from them? (if they would sell) You would be taking out a big mortgage past the age you’d reasonably want to be retired by based on an income level you’ve only sustained self employed for the past 3 years, which is risky/foolhardy.

I’d look for something cheaper and get it paid down as quick as you can.

Could you not do a shorter term, so pay more than £2k/month, but have it paid off sooner. What would a 10-year mortgage look like in terms of repayments?