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Original poster

Buying Houses - to take full mortgage amount offered?

44 replies

GoingSlowly · 24/01/2017 13:08

Hi, I'm just wondering how normal it is to take the full amount that your mortgage provider is offering when moving into a bigger house. I know people who must have maxed themselves out to buy a massive house, because they are now 'cash poor' and always seem to be scrimping.

I am very conservative in nature when it comes to finances - whenever I've moved house in the past I've had a figure in mind that I would like to be spending per month on my mortgage. This figure is pretty low at £500 ish. My thinking is that if I keep the payments low I have spare cash to spend on being able to enjoy life, and also save money. Often money we save is then put back into the mortgage in over-payments, to build up equity.

But I feel as if my approach is not the norm. We are about to do the last move we will ever do. As we have no pensions, I'd like to jump up to a bigger property, as the house will basically be an investment for the future. However, I feel scared to take on a huge mortgage, in case interests rates rise? When I do a mortgage calculation, the top figure the banks would lend us would cost just over £1100 per month, which for us, means we would need to cut our lifestyle down a bit and would not be able to spend as we do now. We do not have a particularly big income - I do not work so my husband is the breadwinner at the mo.

Just wondering what others do when making a choice about what size motgage to take on?

OP posts:

Notyetthere · 25/01/2017 11:57

Tinsel we were in the same mind at the time. We didn't want to buy a house to live in for the next 5yrs and then move on. Life gets in the way to enable that next move. We wanted at least 10yrs out of it as you never know what might happen that your circumstances change and can't progress on to the next rung of the ladder.

Notyetthere · 25/01/2017 11:57

FormerlyFrikadela01 · 25/01/2017 15:01

because the old style "property ladder" concept where you can step up every few years is no longer a reality

This... In spades. I know too many people stuck in their starter homes because they just can't afford the next step up.

Notyetthere · 25/01/2017 15:13

Formerly try telling that to my ILs who think that house prices are still rising at the incredible rate they used to. They bought their current family home in the 90s for 110k, it is now worth over 550k and they wonder why people like DH and I in normal (relatively) jobs can't afford to buy family homes. Even with the equity that we have in our house, it is still impossible to save enough to afford their home.

flownthecoopkiwi · 25/01/2017 15:23

we got offered a lot of money and are actually taking 95% of it. Didn't see the point of going through the pain and expense of buying another house to not go for one that we would want to be in for 15 years.

We struggled onto the market 7 years ago at low end and now buying top middle using the equity we have built up.

Mortgage going up by £700 a year, but paying nursery fees currently that will drop soon and then disappear. And we may be poor, but we will have a lovely big house to sulk in.

We are also maintaining a financial buffer zone so we will have a plan B if we need it for quite a few months.

EineKleine · 25/01/2017 15:28

You need to build in headroom for if (when) interest rates rise. It's about the long game and trajectories. Maxing out the mortgage when you're confident your income will increase and your mortgage won't is one thing. Even that has risks, because neither of those things are certain. But maxing it out expecting income to plateau and/or knowing interest rates will increase at some point is inherently much riskier.

We have never maxed ours but we've always been a 2 income family, largely because we coildn't pay our mortgage on one salary!

Original poster

GoingSlowly · 25/01/2017 17:19

Tinseltwins - I am beginning to feel in a similar situation. Most of our friends who stretched themselves seem to stress about money more than we do, but we are quickly outgrowing our house, when theirs will last them for a long time.

I have just worked out that almost the max amount the bank will offer us would equate to monthly payments that are almost 40% of our monthly income. Someone said on here to aim for about a third of your income towards the monthly mortgage. So it seems a bit high. However, in the future I will probably be doing some kind of job myself (next couple of years), so the percentage will decrease then.

OP posts:

Batteriesallgone · 25/01/2017 17:51

We stretched. But the bank didn't want to know about bonuses so we could easily afford with the bonus. Used it a couple of years running to make overpayment and got down to a sensible repayment amount. It's such a tricky decision. I was panicking a bit at first! Much happier now we're a bit more protected against rate increases

Equimum · 25/01/2017 19:31

We're looking at taking almost all (about 94%) and the repayments will be about 40 % of net income, but as someone has already said, I'll be going back to workin the next couple of years. Even if I only earn £10000/tr, the current repayments would be about 1/3 of our net income, and bibeif the includes DHs bonus. We're in the SE and want the this to be our final move into a proper, long term family home.

buckyou · 25/01/2017 19:49

We pretty much maxed out but we wanted a property with land for the horses and they just don't come cheap. If we hadn't wanted the land I don't think we would have mixed out so much - no need. But I guess it is at least making us invest a lot for the future.

rallytog1 · 25/01/2017 19:55

Tinsel you've hit the nail on the head.

One thing to remember these days is that banks 'stress test' your mortgage amount against your income/commitments and only lend that amount if they're confident that you could afford the monthly payments if interest rates did rise. So the maximum amount for anyone now is likely to be lower than it would have been a few years ago, and therefore it's less risky to borrow the max.

Batteriesallgone · 25/01/2017 20:07

Ours was stress tested up to 7%. But that's not that high really, it's just that we are in a real low patch with rates.

empirerecordsrocked · 25/01/2017 20:33

We took the absolute max that we could and borrowed and extra 5k from parents.

We are in a house now that we will stay in at least until dts are through secondary school and as our salaries have increased it's less of a stretch than it was when we bought ten years ago.

FourToTheFloor · 26/01/2017 06:50

I don't know what the max was we were offered but I was going off on mat leave so did my own numbers to make sure we could afford it on one salary.

We weren't going to stay here long so we didn't buy the biggest house. We can't decide to extend or move countries. I'm not sure I'd but another house in London. The prices are huge and imo not sustainable so I probably do think there will be a crash/correction

Mortgagedilemma · 26/01/2017 07:46

We have always tried to ensure we could get by on either of our salaries.

There's no way we would have taken the max amount offered it was insane.

Needmoresleep · 26/01/2017 11:01

Practice saving the extra amount you would be paying in mortgage and see if you can manage. Then fix for five years.

It depends on where you live. The transaction cost of moving in a high price area is high, so you might often be better off borrowing to the max and missing a rung on any ladder. But it is a bore. The end of our mortgage is in sight and suddenly we feel very well off, and could swap our 3 bed terrace for a mansion in other parts of the country. Or more probably allow DH to retire early. But at the cost of living like students for years.

TurquoiseDress · 26/01/2017 12:38

Hi OP

I think it's a very individual thing and will depend on your circumstances and what you are prepared to sacrifice.

We are in our mid/late 30s, FTB in SE London and we will probably take the maximum the bank will offer us.

Plus that will only get us a 2 bed flat at most. It's make me feel nauseous at the amount we are contemplating borrowing.

However, the monthly mortgage repayment is still less than the rent we are paying now!

We're looking at a monthly mortgage of around £1500

Sounds staggering but we pay more than that already.

On the flip side, the worry is about when interest rates will start to go up and the fact that whatever we buy will only suit our current needs for a few years eg if we do end up having baby number 2

Then we will all the costs of buying/selling to pay out again.

But then we don't have much choice if we want to escape the rental trap that we find ourselves in currently!

engineersthumb · 26/01/2017 13:38

I think that it depends more upon circumstances than plans. My wife and I bought our first house in our early thirties, we lI've in an expensive area so the result is that a modest house represented pretty much 100% of our offer amount.

rallytog1 · 26/01/2017 19:02

It's not that high Batteries, but it's extremely unlikely we'll be back to those kinds of levels in the next few years. And it has still led to banks lending more conservatively than they used to.

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