£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

Also I could maybe inherit later as both my parents are still alive but wouldn't want to factor this into buying the house and not as much as DP more like £200K or thereabouts x

That’s only £6k a month. What will you be doing with the other £6k? You could easily add more into savings or investments.

Sorry should have said income can be variable throughout the year as we are not PAYE. So harder to know. For instance, income was half in August what it was in July as we were home more with kids.

How often do you partner's children come and visit? Unless it's very frequently, consider a smaller, less expensive house and rent a holiday place nearby for their stays (you can pay for it to facilitate visits) or all stay somewhere bigger together for holidays/family gatherings. Much more cost effective than buying a huge house where you only regularly use some of the rooms.

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

And grandchildren may appear in that time, so you'd have the space for them to stay etc

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.

if you overpaid and were putting in £3k a month to your mortgage - you'd pay it off in 12/14 years but you may not be able to due to restrictions of 10%

You could change mortgage after 5 years and anything you've not been able to pay off - pay off then as you go into another mortgage.

Thanks. It's a 4.5 bedroom house so not particuarly huge huge, bedroom 5 would make a small office. The house has two lounges and a large -ish kitchen diner. It's the area where we live and work that is expensive (SE village). We could move somewhere else but the house prices in a 25 mile radius are similar for the sort of house we would like and the kids and businesses are settled here. The road is quite quiet and not on a main road which we would prefer but it doesn't have a front garden for example, it is not particularly grand! To go with something around the £600K mark around here would give us 4 bedrooms but no extra space downstairs and a smaller kitchen diner. Less space for all of us. But cheaper mortgage. So it is about the numbers really.

If you are not going to stay in the house and live for now - why not spend a bit more? go to £850/900k

Thanks. My MIL was a very special person in every way. Very much missed x

No pensions? Debt? 49 and rent? Earn £150k annually? All of that is madness

Thanks for your helpful comment!
We both got divorced years before and were renting before we met so didn't have a lot to bring to the table unfortunately. We were not very clever with not paying into our pensions and as I've said that is something I would like to get on top of now that our debt has been wiped out. My DP's mum did tell us she was leaving us money for a house deposit but the lump sum is more than we were expecting. We had started saving for a house deposit but had only got to £25K.

I’ve never earned that much money so perhaps I’m being dim but surely you’d put more into your mortgage each month, rather than planning to work until you’re 70. You’re bringing in approx 12k a month and have no debt. Where’s the other 10k going if it’s not in your savings or pension? Surely you don’t need to spend 10k a month on groceries etc. Do you really need a 750k house. Is there not one at 600k, you could put 500k in and pay 4 or 5k a month mortgage and be mortgage free at 60? Like the 600k houses you’re mentioning, how much would it be to get one of those, and then add a garden office? I imagine less than 150k?
How much is the house you live in worth now? a 600k house would probably still be an upgrade if your rent is so cheap?
if you go for the 750k house I’d pay much more than 2k a month personally in your circumstances, if it’s life changing to have a bigger house, then it’s worth sacrificing in other areas? I’d also plan to start paying into my pension too! 150k household income and no pensions is crazy, I appreciate you’ve not been at that income long though.

Yes thanks we have been silly. I was renting as a single person for a long while and my rent was really high and couldn't save so was just getting by. I did have a little debt but my DP had more debt when we met and already had two children so was having to rent a house he couldn't really afford and got into a bit of a mess with it all. Eventually his relative offered to let us rent their place at a reduced rent to help us out which was a life changer and we were lucky in that regard but with three kids and earning much less back then it was still a bit of a struggle to be honest. Things have obviously changed a lot in the last few years with earning more and we've been able to get needed dental treatment and buy newer cars (outright) and finally have some days out and holidays so it's been a catch up time. We have saved some money but now our income has stabilised we need to start managing it properly.

Ps should have said that we do work very long hours now so having a house that doesn't need work is very attractive...

Honestly, if you don't have pensions I'd be investing the £450K to give you retirement income. And max out your pension contributions, you can each put up to £60K into a pension each year (and can use the previous unused allowance for the previous three years). There's no point having a lovely house if you can't afford to live in it.

I would buy the house.

I would then get some advice about planning for retirement and how best to do that. For example, your plan may be to downsize at 65 and use the equity for your pension and/or you may start investing heavily in a private pension now. I think you need professional advice on that aspect.

I still think you should buy a house and enjoy it and provide a home for your blended family.

Yes but you also need a house to live in and renting long term isn't a sensible financial plan either. Pensions are the traditional way of funding retirement but OP may have left it too late to go down that route so may need an alternative retirement plan which may end up being a combination of equity from their house plus savings and/or private pension.

Thank you. Either way it is time to get very serious about our pensions!

But don’t you spread it out? My husband is SE but we spread out his earnings.

So if you got paid more in July, you’d keep some back for August?

They don’t own a house though. They can afford the sums the OP has posted easily!

DH and I have a mortgage til 72, mortage repayment is £2900, combined salary of £195k. We’re not fussed. Well either use inheritance to pay it off, or just sell it.

I think your plan is fine.

We plan to raise our kids then sell and downsize our house (we could afford to pay it off in 5 yrs but dont want to)

First direct don't cap overpayments - something to look into when looking for mortgage products if you are wanting to overpay.

I wouldn’t commit to a mortgage to age 70. At 58 I’m counting down the years to no longer needing to work. Most people have had enough by now even if they can’t afford to retire yet ! I would also prioritise pension payments - it’s surprising that your pensions aren’t decent on good wages like yours.

I'd assume it was a hobby if they haven't got a big chunk of moola already sat gathering dust.

The mortgage will be fine, you could overpay significantly and remember that although it may go on until you’re 70 the impact of inflation will be to halve it by then.

Pensions are a much more serious issue, you really need to be putting all of your earnings over £100k gross each into pensions, and probably quite a bit of the higher rate earnings as well.