£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

Fair enough, I'm Midlands so might be different in capital. Most people I know bought 20s with average 25 year mortgage.

A large mortgage not paid off until you’re 70, when you have no pension provision, isn’t very sensible, particularly when your current level of income is quite recent and presumably not guaranteed to stay there?

Until you updated that you have three shared children, I was going to say he is being very generous indeed to put nearly half a million into a shared asset that you’re not contributing to. With shared children it’s a bit different I suppose, but does he not want to ensure his adult children have something if he was to die before you, or you separated?

How secure are your businesses in terms of maintaining that money for the next 20 years or as much as it takes to meet your outgoings?
Your health is probably good now but in even 5 years you could start to feel the years even if there’s no major health issues. You have no idea what your health will be like at 60-70

I'd move somewhere where £450k buys you a big enough house.
This money has the potential to secure your future and yet you want to use it to get into debt.

I would stay renting the cheap place and invest the 500k

You can over pay. Invest money and pay off chunks. There is no need to assume it’s until 70. If you earned more you could also reduce the term at some point.
But you could also take it out until 65? £2k isn’t that much for that salary.

I'd buy a cheaper house, and start putting money into pensions and savings. If anything goes wrong, you could be up shit creek in retirement.

Yes I would take out a loan for 20 years max then overpay so it’s fully paid off in 15 years or less

Sorry to throw something else in but when you see financial advisor also consider university costs and drain in income this represents. Having to work at same pace until 70 is not always feasible.

If you earn after tax £150k why would you get a mortgage for£2 k a month when have £12k +

I would have a shorter term so pay more

plus why keeping £75k in bank

I would use whole £500k towards mortgage esp when earning so much

insane you earn so much and no pensions and almost 50

@Secretservice009 Does the current house you are renting provide the space you want? If so, could you not stay renting? There's often an assumption that you should buy ASAP but it doesn't always mean that's the best choice.

I’d buy the big house. You can always downsize in the future, assuming you’re buying somewhere popular/not too quirky

I have a very big house. Will you be able to pay for furniture, repairs, bills on top of the
mortgage? I’m saying this because furnishings two living rooms, a big kitchen, 5 bedrooms etc is going to cost you a lot. And when you have a big house there are always things to fix. It’s really not just about the mortgage.

We earn similar to you and took on a 300k mortgage at 50. Using the equity from DHs house to fund the rest. We are now 58 and are finishing paying it this month with savings, we were lucky we had a very low mortgage rate. It’s not been particularly hard or a source of stress. But to be fair the kids are older and left home.

I would say 2k is fine and you can easily overpay but then you have hardly saved anything despite cheap rent so who knows

They have only recently had this level of earning and have just finished paying off debt.

I disagree. It's much more cost-effective to prioritise pension savings. The difference between mortgage interest, high stamp duty, followed by downsizing costs, and tax efficiencies from pension contributions is going to be absolutely huge. People have relied on significant house price inflation in the past but we're now at a point where people aren't downsizing because its not worth it.

How secure are your jobs? It may be great for you now, but what if either of you lose your jobs in 5, 10 years time. The job market for over 55s is dire.

You have 3 children with potentially university costs.
you don’t have good pension provision.
you have recent past debt.
you’ve only been on this sort of income for a few years.
you're considering a mortgage to 70.

i think you’d be wise to downscale your ambition. Work out your plan for uni, retirement, comfortable living etc. then see how much you can easily afford each month for mortgage payments and increased cost of running a larger house. Base your mortgage on a term that ends at 60/65.

but I’m quite risk averse and like to be as certain as possible that my future is achievably secure.

Without a pension you need to wary of relying on overpaying the mortgage as you’ll need to build up savings / pension pots.

I would borrow less and find a cheaper property - housing market isn’t great so you can negotiate lower prices.

Go for it. The house should retain it's value and you are paying into equity not rent.
Yes, overpay the mortgage when you can.
Ask local real estate agents if the location is a good investment over fifteen years.

Unless you have the cash flow and modelling skills to plan out the next 20 years, see an advisor who can show it to you in graphs etc.

You need to budget for all your costs up until the youngest leaves uni, work out how much you can save and how much you could budget to downsize by to release capital / reduce mortgage at that point.

Budget for life insurance and critical illness insurance, relying on paying a mortgage in your 60s becomes more of a risk.

A lot can happen to earnings over 20 years in the face of AI, the economy, your health… and hardly anyone wants to work f/t to 70.

The years between stopping working and state pension kicking in need saving for.

Your best saving years (in whatever way is best: pension / overpayment etc) are the next 5: no or low childcare costs, none at Uni.

Start by doing a realistic actual budget if your outgoings, weekly , monthly, annual costs.

Add extra costs that you may not currently pay: buildings insurance, building maintenance, fund for new boiler.

Your starting pony is your outgoings v income.

Quality of life is important, so making a way to get the right house for the family will add a lot.

You have a combined take home pay of £12,500 and you’re worried about paying £2k in mortgage payments? Is this a joke?

Where I am, £2000 is a low mortgage payment! It wouldn’t even get you a 2 bed flat if you were renting.

Exactly this. It shows how insane the London market is when you think someone complaining about £2k is a joke. Ours is double that!

This is exactly what we are doing. It's great see it coming down quicker than it could.