Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Original poster

Moving up the property ladder on one income?

80 replies

fluffygreentail · 14/01/2015 21:50

We are running out of space with two preschoolers in a house with smallish rooms. Since the summer, we have been starting to think about buying a larger house but only have one income.

Looking at finances, we would be increasing our mortgage to net income percentage from 22% to around 33-37% depending on how much we borrow and the price of house we end up buying. We'd still be able to save a few hundred after bills/higher council tax+ estimated increase on utilities/food/having a few days out but that seems tight. We seem to get a run of quite months when we have to drop money on unexpected things (things which cost several hundred) and then nothing for months after. Children get more expensive as they get older too.

It seems like the right time to make our next and final move but not sure if we are cutting it too close to the wrong side of manageable. If we don't do it now, we'd never do it.

Or, being naturally quite frugal, we continue to save to add to the rear of our house but due to space constraints, it wouldn't be a huge extension or just start overpaying our mortgage.

Any experience of this situation?

Thank you.

OP posts:
Apatite1 · 15/01/2015 13:39

Ah, atticus I see what you mean. Needs discipline though! Do you face any penalties with the regular overpayments? We need a loan for house improvements, not sure whether we should get a loan, remortgage on IO or repayments or what. Should be able to afford payments of 6k but am a bit wary of committing that much evey month in case one of us loses their job. Thoughts?

Apatite1 · 15/01/2015 13:40

Sorry to threadjack fluffy!

wowfudge · 15/01/2015 13:41

fluffy - does your DH have critical illness cover and life insurance? He should have both imo as the main breadwinner. If he has been in his current job for more than 2 years I think it is, he would be entitled to at least statutory redundancy, and a lot of companies pay more than those statutory rates when they make redundancies.

atticus what vehicle are you using to pay off the capital? I'm not quite with you, as you can probably tell.

Original poster
fluffygreentail · 15/01/2015 13:44

No probs, its all useful discussion. From the moment we entered our mortgage agreement, we could over by by 10% of the previous years outstanding closing balance. So if I owed 130K jan 2014 to 31 dec 2014, this year I could overpay by 13k.

OP posts:
Apatite1 · 15/01/2015 13:45

Wowfudge, looks like atticus is paying off capital regularly with overpayments already.

Original poster
fluffygreentail · 15/01/2015 13:45

well, a year into our mortgage, we could overpay, is what i meant.

OP posts:
atticusclaw · 15/01/2015 13:48

We personally don't pay any penalties for overpaying and can overpay any amount at any time so we overpay the regular amount which takes us to the equivalent of a repayment mortgage and then if we ever have any unexpected income we also make lump sum overpayments.

We did have a period a couple of years ago where we thought I might not have a job. The fact that we had an IO mortgage meant that we would still have been able to stay in the house and keep the DSs in school. If the mortgage had been repayment we would have had to move out (although we would probably have tried firstly to rent out the house to cover the mortgage and rented a much smaller property to live in)

I would say that interest only mortgages are hard to come by than they used to be. But if you can get one then they are a great thing to have.

wowfudge · 15/01/2015 13:49

Apatite - but she states she has an interest only mortgage and doesn't say where the overpayments are going to pay off the capital. It's that bit that I don't understand.

antimatter · 15/01/2015 13:49

How old are your kids?

Apatite1 · 15/01/2015 13:50

Thanks fluffy, that's useful info. As I was saying on another thread: future proof your house. Can you potentially stay in this house until your kids leave home, even if it's not 100% where you want to be? If so, it's worth stretching the finances, if it's just a short term step, be very cautious. You don't want to be a desperate seller in a falling market. You can ride the lows if it's your forever home iykwim.

Original poster
fluffygreentail · 15/01/2015 13:50

Yes, he does have cover same as you asked. Yes, been in same job 10+ years. Goodness, tuition has leapt up since I needed it Blush.

.

OP posts:
wowfudge · 15/01/2015 13:51

atticus - where are you paying off the capital? If you are overpaying on an interest only mortgage, surely you are simply paying off the interest more quickly? What am I missing?

atticusclaw · 15/01/2015 13:51

Wowfudge we overpay. Our mortgage was over half a million when we bought the house five years ago. We could afford the repayments but saw no need to tie ourselves into large compulsory monthly payments when we could instead tie ourselves to small compulsory payments only.

Admittedly I am quite anal disciplined when it comes to finances.

Apatite1 · 15/01/2015 13:52

But she is overpaying, isn't she?

Apatite1 · 15/01/2015 13:53

Cross posted with atticus: I think I understand what you're saying atticus!

atticusclaw · 15/01/2015 13:56

No, our interest element (the amount we have to pay) is about £500. We pay instead about £4,000.

The bank takes £500 from the payment and pays the interest, the other £3,500 goes to reducing the capital.

Next month my outstanding capital is slightly smaller so my interest is only £495 and £3505 is paid off the mortgage capital (i.e the loan).

and so on.

By making these overpayments, which are the equivalent of the payments we would make if we were on a repayment mortgage, we will have a zero balance by the end of the term (in only seven years now!).

wowfudge · 15/01/2015 13:56

atticus - I don't really want to push the point, but where are you paying off the capital on an interest only mortgage? You must have some product you are paying the overpaid amounts towards which will pay off the capital? If the mortgage is interest only and you are overpaying, you are only overpaying on the interest element surely?

Am I being thick?

atticusclaw · 15/01/2015 13:57

Not meaning to thread hijack by the way I just thought the worked examples might help the OP.

Original poster
fluffygreentail · 15/01/2015 13:57

they are just 1ish and about to go to primary school. We could stay in the potential house until children leave home. Its a great house. Everything we want and more except :

  • it is not in the catchment for schools we know about but yes, am visiting the primary school next week to check out the general vibe etc.
  • most importantly, it would mean a leap up in mortgage i dont know im entirely comfortable with.
OP posts:
wowfudge · 15/01/2015 13:58

X post with atticus

atticusclaw · 15/01/2015 13:58

No wow your overpayments pay off the capital.

Original poster
fluffygreentail · 15/01/2015 13:58

no atticus, brilliant help.

OP posts:
OnIlkleyMoorBahTwat · 15/01/2015 13:59

Wowfudge On an interest only mortgage, you are charged interest on the amount outstanding each month. The interest will never be 'paid off', it will simply reduce as the amount owed reduces.

atticus is paying her mortgage in irregular lump sums, each time she does this, the amount owed, and hence the interest charged will reduce.

Apatite1 · 15/01/2015 13:59

Ah, I see what you're driving at wow. Atticus?

atticusclaw · 15/01/2015 14:01

Ilkley has explained it better than I was