How much would you borrow?

[Skewbald]

We are hoping to buy a house for the first time soon at the advanced age of 40. Would be very grateful for the advice of wise Mumsnetters on how much is sensible/realistic to borrow.

Circumstances:

Gross household income between £62,000 and £70,000, made up of:

Salary 1: £50,000 pa
Salary 2: £10,000 pa
Variable income from extra work £2,000 to £10,000 pa (gross)
Savings for deposit and costs £40,000
Childcare costs (for next 2 and a half years only) -£7,000 pa
Commuting costs: approx -£1,500 pa

Commuting costs and second salary all dependent on staying reasonably close to where we are now. We are keen to do this to avoid changing schools, but it's looking a bit unlikely due to local prices, so commuting costs could end up being more like £3,000 and second salary might disappear temporarily.

Any ideas? I am thinking that we could borrow maybe £210,000, bringing our total budget to £250,000. Does this sound about right?

Well - we have an income similar to yours - but without the childcare costs and our mortgage is "only" £140k ish. To borrow £210k for a house worth £250k would mean an 85% mortgage. How would you cope when interest rates rise? Also, when are you planning to retire? You might not get a 25 year mortgage? If I was you I'd go to an independant mortgage adviser and talk things through.

Yes, quite, gin. £140k would be a dream but won't get us very far anywhere commutable to where we need to be to earn the money so we're a bit stuck. Mortgage would probably have to be 24 years I would imagine. Not that we are planning to retire at 65, but I'm guessing that lenders assume a 65 age limit.

Have an appt with mortgage advisor but thought it would be good to get some ideas here first.

What are your repayments on £140k if you don't mind my asking?

Anyone else? If £210k not doable, how about £200k? £190?

How safe are jobs? What would happen if you lost salary one?

on 140k with insurances etc its around £800 a month - sorry can't remember exact figure we pay in £1000 a month and then have a month off every so often

have a look here at what you can afford to pay back each month.

www.bbc.co.uk/homes/property/mortgagecalculator.shtml

I think you can easily afford a £250k mortgage on your income. I'd fix your mortgage for as long as possible (I am super risk averse) so you know exactly what you are paying and you can afford it.

Assume a monthly income of £4,000 (is that about right on your joint salaries?) plus your extra income. If you had a mortgage of £250k on 4% fixed your repayment would be £1,333 a month. I'd say that was very do-able
Good luck

Thanks gin, that certainly sounds very reasonable. The one thing that is not awful about interest rates going up is that I'm expecting that will happen at roughly the time when we stop paying £600 or so childcare every month, so I'm hoping that will balance out.

Harriet, I'm not sure what constitutes a safe job nowadays, and if we lost salary one we would be in a lot of trouble of course. But I'm not sure whether that is a good enough reason to continue renting for the rest of our lives? How will we pay the rent beyond retirement if we live that long? Whereas if you buy and the worst happens, presumably you may lose your house and have to go back to renting, but are no worse off than when you started?

I was thinking in terms of whether you go for top of your borrowing or lower so payments are lower( went from joint income of 75k to 9k now back up to 20k in just over a year- luckily we have a lowish mortgage but we couldn't remortgage if we had needed to)

It also depends on where you are in the countryto how much you need to get the size house you want and may need to risk more!

And if prices are stable in your area or potential to drop further

we have the same income as you and currently owe £100K on a mortgage owith 16 years left but we intend to move this year and will have to borrow another 100K to a total of £200k.
We are going to up the years to 20 so we have a lower monthly mortgage to pay (but I intend to over pay every month).

I am also 40 but want to clear mortgage by time I am 55 at latest.

I think this is affordable for us - monthly payment will be about £1300 to which I'll pay another £300 OP or so. We don;t have childcare costs now though as out children are at school.

Can you get a decent home where you live for £250k? If yes, I say go for it.
We can't - more like £400k here for a 3 bed semi - we have about £200k equity so approx 50% LTV

When I'm working out costings I look at the minimum we could/would have to get by on. So in your situation I would discount the £10k job, and then deduct everything from the other salary and see what you are left with. Presuming that if the £50k job went you would be in trouble if you rent or own.

Inti, you are a ray of sunshine, thank you. I'm not sure we've got £4000 net a month coming in though. Or perhaps we have. I don't really get involved in Salary One apart from the portion that lands in the joint account. Now I'm thinking that I should have done.

Anyway this is all wildly off the point.

Yes, regarding the fix, the only thing is that most fixes with a decent rate are for 2 years aren't they? And every indication seems to be that rates are likely to stay low for 2 years or so and then shoot up at some point after that. So I wondered whether in fact we would be better off with something variable at a lower rate and try to save the difference for harder times ahead?

My fixed rate ends this june, I was planning to go to a 5 yr fix, as we are pretty close to the max we could pay. Buty, I'm leaning more towards going to the variable rate and looking to go to a 5 yr fixed after 12 mths or so.

Sadly £250k will not get us anything particularly decent, no, but beggars can't be choosers*.

3 bed terraces where we live now are £450+ but if we move into rougher territory in neighbouring borough but still within walking distance there is a possibility of picking up a small 3 bed in a bad way for £270+ if we can get a couple of family members to lend us £10k each. Or we move further away still and change schools we might find something nicer, but there is a big problem with school places all around here so that is quite a nervewracking option. And then of course there are the train fares to take into account.

*awaits flaming for use of word beggars on HRT income

Oreo, yes that does sound like a good plan. Is there a danger though that the prices of 5 year fixes will have gone up by then in anticipation?

i agree rates will be low for the next couple of years so either go for a 3.5% or less fix now for 5 -10 years now or variable for a couple of years then fix when you feel time is right.

we are on a fix at 4% at mo until 2014 so the extra £100k we will borrow, will be at SVR , then we'll fix the full £200k in 2014 for 5-10 years (depending on the way the land lies at that time).

I don;t listen to the "experts" anymore as to what will happen to rates as they are vested interests on the whole and have no more clue than I do. I'll make my own decisions by reading financial pages of newspapers and my own instinct.

Gah, I used to read the financial pages avidly and in consequence we did not buy in Jan 2007 at 5x salary as we were advised to, as it was very obvious that a crash was coming. What I did not anticipate was that the crisis would be so great that interest rates would fall to unthinkably low levels and house prices around here remain resolutely buoyed up. I wish I had known nothing and just gone for it

I would be extremely happy with a 10 year fix, but presumably you need quite a favourable LTV ratio?

i came off a 2.5% SVR nationwide mortgage (the best rate on the market at the time) in may 2009 because I did read and trust financial experts who said FIX NOW, rates to zoom up in autumn. worst mistake I could have made, costs me £250 extra per month.

It annoys me every day! and I will never 100% trust a mortgage experts advice again

Yes the 5 yr fix will go up when the 'experts' say the rates are going up, but at the beginning not as high as when they do go up IYSWIM!

When I arranged the fixed rate I'm on now my options were. £545pm SVR, £660 pm 2 yr fixed or £700 and odd 5yr fixed.

I went with the 2 yr fixed, but had I gone to the SVR I would have been over £100 pm better off - that I could have used to make over payments.

So my thinking for now is that when I drop to SVR in june (presuming the base rate stays as is for now), the money I will save each month will ofset the money I will lose when I switch to a 5 yr fix when it looks like the rates are going to start to rise.

Now depending on how much disposable income you have will determin what your options are when they rise. The max I could afford to pay pm is £1000, so I will fix as we just couldn't pay it if it rose over that amount. You may be able to so it is worth taking proper advice nearer the time.

Also, I would say once you have a mortgage make over payments whenever you can. Most mortgages allow you to over pay by 10% in a 12 mt period without any penalties. So if you borrowed £200k, you could over pay by £20k each year.

Bring your mortgage down as quick as you can. There is bugger all interest to be made in savings at the moment, but reducing your mortgage while you can will make a big difference when the shit hits the fan!

Ah molly, sympathies. I really hate that all this stuff has become such a massive gambling game.

Also, making over payments earns you favour with the bank. I took a 40 yr intrest only mortgage to get this house in our circumstances helped by my bank manager when they were allowed to fiddle mortgages. After the initial 2 yr fixed I was on ended they let me reduce it to a 25 yr repayment mortgage with no change of circumstances, this was because I had met all of my payments and over paid. I did over pay the 10% (thank God as I don't have that kind of income now). It also goes in your favour if in the future you fall into difficulties and request a payment holiday etc.

Our mortgage is roughly £240k and we pay £1550 pm.
We borrowed extra this year and it took us right to the edge of the max LTV and we HAD to fix - no SVR option at 80% but we also moved a residual interest only sum to repayment at the same time as my endowment is a complete waste of space. At 42 & 43 we went out to 20 years.
The plan is to get the house re-valued (as we now have 2 more bedrooms than when we borrowed the money) and then move to a more favourable rate when we can.
We did a LOT of budgetting before we committed ourselves, and in the end decided we could wait forever with the kids squashed in sharing whilst we waited the doom monger predictions to ruin our lives and dreams, or we could go into it with our eyes wide open and take our chances - but with a bigger house...

thanks, pepperrabbit. Can you just whisper your household income so I've got something to compare?

No 1 £65k
No 2 £20k
There's no optional bonus/extra potential at all, neither of us will get a payrise so literally that's it. DDs 15 hours of childcare kicked in this month which has made a BIG difference as childcare for 3 means i pretty much work for nothing during August for example.
DH commutes fulltime so his train ticket is £3200