£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

You mention you have only been earning £150k take home for the last 3 years. Will this definitely continue? I know a lot of people in their 50s who are finding their earnings dropping.

Is that true? I’m not a first time buyer but this does make me feel better about the 32% were committing to - I’ve done the maths so many times but it feels high!

I’d do it. You can downsize even all the kids have left.

You can comfortably afford this property and you won't need to work until you are 70. For a start your repayment in 5 years time will seem much less. You easily have the option to overpay. You have a savings buffer. Obviously things can change in which case you have equity, you could retire and downsize or cope with whatever life throws at you. You haven't spent that money you'll invest it in property. You're in an enviable position. Good ol' mum!

If you have low pension pot (and I’m assuming your definition of low is accurate) but earn 150k between you then I’d be looking to remedy this. One or both of you must be higher rate tax payers and you are missing out on a lot of tax relief by not paying more into your pensions, it probably won’t reduce your take home as much as you think. Also your employers may match your % contributions up to a certain point so you’re potentially missing out on free money there.

If you were in a better position with pensions I’d suggest considering leaving the mortgage term as a long one and prioritising your pensions. Your pension will give better returns long term (plus factor in the tax saving) and when you come to draw pensions you could then use the lump sum towards it. However for a lot of people they prefer the knowledge and security that the mortgage is gone sooner, and it’s not a case of one or the other - you could do some pensions and some overpayment. I think you’d also want a decent buffer of savings as well, again for peace of mind.

this is a good calculator for showing what your net take home will be in different scenarios, You can try out a few % changes on your pensions and see how it affects your tax and take home pay

www.thesalarycalculator.co.uk/salary.php

Don’t commit buying a house until 70, especially if you have no mortgage. All my friends in their late fifties/early sixties are talking of retirement and are wanting to finish alot earlier, and are pouring money into their pensions.

You don’t need two lounges and two studies. One lounge can double up as a second study plus bedroom for when the adult dc stay over (sofa beds).

At 49, you have to think with your head not your heart.

@Secretservice009 if you really want the house and are willing to down some later in life then buy the house . Also if you can pay up to 10% each year early on your mortgage.
can you afford to pay it off in 10-15 years .
how much was your rent and how much was your debt ?

With that take home pay, why would you need or want to spread the repayments over 21 years. Just pay it off far sooner!

Also, why such prolific use of the word
circa? I’ve seen it more in this thread than I have in 10 years.

If you're sure your incomes are stable, you could easily chuck £3- £4k a month at a mortgage, reducing interest and term considerably. And for heaven's sake get your pensions sorted. And savings to help DCs at uni

Financial adviser sounds like a plan.

I would look for a smaller house. You need to build in that interest rates may well increase. That one of you might become less healthy in some way and not be able to run your businesses as you do now. And as you age many things become harder. Moving house will be one of them.
I would not put so much money into a property. I could well be wrong but I don’t think property prices can continue to increase as they are.
If you had inherited the money when you were younger, perhaps. But not paying a mortgage off until 70. No.

Why would you only pay £2k a month on your mortgage. You have £15k a month income. Increase the mortgage payments and the mortgage will be paid off sooner.

I would not put so much money into a property. I could well be wrong but I don’t think property prices can continue to increase as they are.

People have said this for 20 years.

I would not be commiting myself to a mortgage into my 70s if I didn't need to

I thought that too! It was never a word that irritated me before but it does now!

I think you need a plan that pays it off before retirement.

There is a certain group of people online who seem positively GLEEFUL at the idea of this happening without the understanding that the county is built on rising property prices. They have stagnated in recent years but they are still broadly going up (unless you live in a London ex new build high rise). We need property prices to keep increasing otherwise it fucks us all.

People talk about the impact on younger people and that’s absolutely an issue but their anger should be towards the appalling salaries in this country not the cost of owning a home.

But there isn’t any commitment beyond the initial fixed period. You can remortgage and reduce your term.

You have lots of options other than paying the mortgage till 70 but you can start from that position. You may well be able to pay the mortgage off if you are saving a lot out of your pretty big income. You could sell and downsize when the kids have flown the nest, or if it became too much of a burden as you get older or if either of you become unable to work. The decision is just for now it's not cast in stone.

Well, when 2008 came along they were right !

If you purchase a house for £750,000 over 18 years that would take you to state pension age

you'd have at 4.85% a repayment of £2085 monthly - if you're allowed to overpay by 10% that would mean you could pay and extra £208.5 each month raising the repayments to £2283.5 each month - you'd repay the mortgage 29 months early and save approx £22,000 interest

If though you took a 12 year mortgage you'd repay £2,758, you'd save £54,000 interest compared to the first scenario

You're 49 or thereabout now

Id want my mortgage paid off at 61 year old

I don't see how you're going to pay a mortgage at 69 on an old age pension without working and without private pensions to speak of

if you're paying 37% tax on what you both earn, then you're combined income is £7500 per month so paying the mortgage over 12 years would leave you with £4742 to live on

The question is can you live now without the £500 per month or when you are 60 will you be happy to sell the house and move else where if one of you has to stop working

Its a gamble

We’ve gone all in for our dream house and our mortgage is significantly higher than yours would be and not due to finish until we’re into our 70s. We could potentially receive inheritance that would enable us to pay it off but if that doesn’t happen we are prepared to downsize which we will easily be able to do with the equity in the property. Our house is what we need/want for now so I’ll be happy to have had the time here that we have, if that’s what it comes to.
Would a similar approach be an option for you?
I’ll caveat that by saying we have healthy pension pots so you’d want to factor retirement finances into your plan.

I would plan on working that long if I didn't have too. I'd also worry about the sort of maintenance that size house will need over the next 20 years when I'd want to start saving for our pensions.

Maybe I'm being cautious.

How big a house is it? People seem to be assuming a £750k house is a mansion but OP is in the SE?

I'd buy the bigger house and plan to live in it until I'm 59 and have a 21 year mortgage

Then plan to sell the house and downsize considerably to my forever bungalow/town centre apartment, which I could purchase without a mortgage

I'd start putting money seriously into a pension that im not spending on the shorter mortgage - so the £700 a month - but that can be changed yearly - so id probably start with £1000 a month and reduce after 2/3 years. You'll get tax relief on the pension which you'd not on the mortgage

that way by 61 id not have a mortgage and have 4-6 years left to work and take both state and private pensions

Wow so many responses since I last checked!!

This response is the way my husband is thinking.

We can always downsize later but enjoy the space with the kids while they are here and popping back regularly (the older ones).

We like the house in question due to its size and the fact that it is only around 15 years old and won't need extending, so no real construction or renovation costs to think of (as per many of the cheaper ones available) and less hassle with extension being built and all of that.

What DP and I need to get on board with is a proper budget and planning.

Would £2.5K - £3K mortgage per month (over paying over 20 year period), £1K pension, £1K savings and £1K investment per month work do you think? We still want to be able to enjoy life and our earnings are variable because we work for ourselves so harder to plan. But with this framework we will have extra we can chuck at University savings for the kids etc.

The older kids (my DP's eldest) have been left a bit by their grandma too, the younger three not because my MIL knew we would be getting married next year and therefore I think the money for DP was left for us if that makes sense? We will split fairly with all the 5 children in wills etc. x