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Original poster

Should we max out our mortgage?

52 replies

boardergirl · 25/01/2011 13:01

We have 3 small children (and maybe want a 4th) and currently own a 2 bedroom flat. We are thinking of putting our flat on the market in the spring in order to hopefully buy a house by the end of the year.

My dilemma is how big our mortagage should be. My husband has been told by an agent we could get £190k so with a £30k deposit we could buy a big 3/4 bed house that we would stay in forever, or get a smaller 3 bed house with about a £140k mortgage that we maybe would have to sell in 5-6 years as it wouldn't have enough living space for 3/4 teenagers- is a living room and kichen/diner enough living space for a family of 5/6?

Our total take home income is about £2200 a month a £190k mortgage would be about £1000 a month is this affordable with having to pay all the moving debt as well.

I also own a 1 bed flat that I don't want to sell yet- hopefully in about 5-6 years we will have 10-15k equity from that.

I'm really confused about what to do should we struggle financially to buy a forever house or sell again in 5 years?

Does anyone have any similar experiences and advice?

OP posts:

nikos · 25/01/2011 13:53

I wouuld go for the forever house now. In 5 years time that payment won't seem do much and you are still leaving yourself a bit of breathing room each month.

DuplicitousBitch · 25/01/2011 13:55

moving is expensive so yes go for the big mortgage. bear in mind interest rates will go up and it will be unspeakable hard for the first year or so.

personally i would sell your flat

MollysChambers · 25/01/2011 13:58

Please please make sure you factor in for interest rate rises.

If you have done that and can afford bigger house then I would go for that.
Second selling flat now.

DuplicitousBitch · 25/01/2011 13:59

also 1000 repayment for 190k seems quite low, is it a 50 year repayment?

GetOrfMoiLand · 25/01/2011 14:02

Fucking hell no.

£2200 a month take home pay and a £1000 mortgage at the lowest rates for donkey's years?

You will be screwed if the interest rates go up.

My advice - get a 3 bedroom house that you may be able to put an extension on/convert a garage in a couple of years. You can always move again when the economy isn't as rocky.

MassiveKnob · 25/01/2011 14:03

i didn't think 1000 per month repayment for 190k mortgage is low duplicious. I have a 320k mortgage which is 2000 per month. fixed for 5 years.

Mind you i have not looked at the rates recently so could be wrong?

MollysChambers · 25/01/2011 14:05

That's the thing though Massive - fixed for 5 years. It could be a damn site more when the fixed period end.

ghosteditor · 25/01/2011 14:06

Do look out for upcoming rises in interest rates - DH and I have just finished the fixed period of our mortgage and have been looking around to see what kind of deal we can get. You definitely need to look at what your finances will be like if interest rates go up.

Having said that generally speaking it costs a lot of money to move house - we estimate about £15k for us - so that should be factored in too. Good luck!

Katz · 25/01/2011 14:09

i'd be looking for a house with potential, one which you can extend in the future. I wouldn't be looking to over stretch at the moment. We're about to extend our house and the extension is going to cost £13K.

MassiveKnob · 25/01/2011 14:09

yes molly - quite agree, you need to be able to keep up the repayments if the rate goes up so if you are maxed out now, I wouldn't go for the larger mortgage.

teta · 25/01/2011 14:13

Don't do it.It is way too much money out of your take-home pay.The economic picture is still very uncertain at the moment.I really would opt for the lower mortgage and maybe delay having a fourth child for a bit.Howvever i do know how difficult lack of room can be and how much space several kids can take up[have 4 myself],and have every sympathy with you.

deepdarkwood · 25/01/2011 14:18

Just a little point ... don't listen to estate agents who say that if you 'just pay a little more you'll get a forever house' Remember it;s in their interest for you to buy a more expensive house!

£1000 month sounds like a lot out of your income to me - in the context of very low rates at the moment, and the running cost of 3-4 kids!

But then my mortgage will be paid off in 1-2 months, so I am the voice of caution

lalalonglegs · 25/01/2011 14:18

It depends which stamp duty bracket you fall into: if moving into a smaller house and then moving again is going to cost you many thousands in SD, you might be better just to make the leap in one go.

Agree that #1000 a month is a bit of scary proportion of #2,200 take home pay. Is that just your husband's wage or do you/will you work as well?

JarethTheGoblinKing · 25/01/2011 14:19

Just to warn you, we have a £190k mortgage and the highest we've ever had to pay monthly is £1250, so bear that in mind. (We currently pay just under £800pcm as the interest rate is so low.) We couldn't afford to do anything to the house when the payment was very high, and felt very trapped. Doesn't help that we're in negative equity either

Definitely fix a rate, and if you can afford it save 10% of monthly payment as a bugger in case the rates go up when your fixed period ends (over 5 years this would give you approx £6k + interest)

Personally, if I was in your situation, I would definitely sell the flat but think I would go for the slightly smaller house but only if there was scope to extend in future to turn it into a forever home/sell on later.

MollysChambers · 25/01/2011 14:20

Actually looking at those figures I wouldn't be able to sleep at night owing that percentage of monthly income on a mortgage.

I am completely risk adverse though.

flippinggorgeous · 25/01/2011 14:25

We are in the process of getting a larger mortgage but wouldn't risk such a high pecentage of our income. You have to have a safety net allowing for future interest rates but also for other costs you may not expect- car repairs, boiler trouble etc.

Mandy21 · 25/01/2011 14:28

we have a mortgage which is about 45% of our take home pay and its REALLY hard - with nursery fees, bills, food, just every day expenses for the children, we have absolutely nothing left at the end of the month. Things will change when all 3 are at school and its something we've done so we can be in the best area for schools etc - this is a forever house but its an old 1930s house with the decor of an 80 year old couple and we can't afford to do anything at all to it - and won't for 2 years. There are no holidays for the time being (we might stretch to a few nights camping) and we're having to be really careful - I can just about do this knowing that things will change in a couple of years but there is no way I could do it for the long term. I also worry constantly about being able to afford everything, we've already had to get a loan.

Just think very carefully.

GetOrfMoiLand · 25/01/2011 14:47

I would not be able to sleep at night with such a high % of income going on a mortgage.

At the moment our mortgage is pretty small - 8% of monthly takehome i have just worked out. That is great as it means if one of us is not working we can afford the mortgage (DP wasn't working for 3 months last year, I could afford to pay the mortgage).

We are well able to afford a bigger and nicer house in a better area, however we are keeping this one and planning to build another house in the garden and an extension on the side (planning permitting, it has dragged on for years) in order to be completely mortgage free.

My SIL lives in a beautiful house in a lovely part of Cheltenham, however her mortgage is over half her monthly take home. Sod that.

BirdyBedtime · 25/01/2011 14:53

I totally agree with some of the other posters that IMO a £1000 mortgage on a £2200 income is way too high a percentage. Obviously we don't know your other circumstances but to give an example we are currently paying a mortgage of £800+ on a joint income over £1k more than yours and some months are desparately awaiting pay days (and that is not an extravagent lifestyle by any means). If you have 3 children you are probably spending over £600 a month on food which then only leaves £600 for everything else (bills, clothes, emergencies, travel etc). I wouldn't risk it.

Original poster

boardergirl · 25/01/2011 14:58

Thanks - loads of different opinions this has given me a lot to think about!

Our take home pay is for both of us. I work 2 different jobs at the moment totalling 27 hours a week and I'm finding that hard enough so don't want to work any more. My husbands salary might go up by about £5k in the next 5 years (but not guaranteed.

One cheaper house we've seen is extendable (a bedroom over the garage) but would still only have a living room and kitchen diner.

Am interested in the advice to sell second flat I'll prob only make a couple of k if i sell now and I have a very reliable tennant. I thought I'd be better off waiting for market to recover?

OP posts:

mackereltaitai · 25/01/2011 15:00

I'd agree with others to look for a house that's extendable. I don't think the additional financial pain sounds worth the half an extra bedroom you will gain.

What about a 3-bed bungalow?

You could consider looking at a maisonette - always much cheaper and often Victorian/Edwardian amounts of space - though possibly not with 3 teenagers

artyjools · 25/01/2011 15:36

Whilst I agree with the idea of stretching yourself whilst you are still young, I honestly don't think these are the times to be doing it to the extent you are suggesting. Your margins are already slim, you have three kids, want another, and you would prefer not to work.

Things are going to get a lot tougher for most of us - higher interest rates and higher cost of living - how will you cope then? Kids do become more expensive as they get older (mine are eating me out of house and home!). Does your income include rent from your flat? What if you lost you tenant and it remained unoccupied for a while?

I suspect house prices are on the way down too, so they might not be as ridiculously unaffordable as now. Pleasse don't take on too much debt now. I'm betting there are many out there who will regret doing that over the coming months.

mackereltaitai · 25/01/2011 15:36

Yes, I think if I were you I would hang on to the flat for the moment, provided you go for the cheaper house option.

lalalonglegs · 25/01/2011 16:22

Are you young enough to be able to get a mortgage that you can have on a 30 year term (ie, are you both under 35)? If so, that might be a way of pushing down the payments for the first few years and (hopefully) as your wages rise you can shorten the term.

MollysChambers · 26/01/2011 09:28

WRT to flat you may find that its worth less in five years time than it is now. In fact I'd be surprised if that isn't the case tbh. There certainly isn't going to be any significant recovery in the housing market in that time. If your in it for the long haul then fair enough but money in property is not a safe bet at the moment.

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