Taking On A Bigger Mortgage - WWYD?

[UnexcitingNamechange]

I've namechanged as going to post some personal information and my previous name is a bit outing.

A bit of background:
Currently live in SE London in a period conversion flat, which we extended a couple of years ago. 2 DC of primary age.

Our flat was 2 bed and when DC2 was born we were bursting at seams and we tried to move, but the market was crazy and everything was going way over asking so we weren't successful at buying anything locally. We extended to make another bedroom/better living space but it was only ever intended to be a stopgap.

We are now at the stage where we would like to move as the space is becoming cramped and DC2's bedroom is off the lounge - not a problem now as he sleeps very well, but as he gets older I can see this being more of an issue.

We would like to stay locally as the school is fantastic and we have lots of local friends, but the only way to get a house is to increase our mortgage substantially, potentially by as much as £200k.

We currently earn quite well and could afford this mortgage. We take home over £6k a month net between us, and so a £2000 per month mortgage is doable (we currently pay £1250) and we could still save a bit. I have no idea if this is a huge or normal mortgage amount for our area and being typically British do not discuss money with our friends, so I have no idea if this is what everyone is doing.

However I am aware that rates could rise, we could lose our jobs and have to take lower paying ones, and it just seems like so much money. I should add that DH earns 3x as much as me so if he lost his job I wouldn't be able to cover our outgoings.

The options are: stay and feel cramped (we are also on a main road I would like to get off if possible). We are at limit of extending this place now.

Move locally with big mortgage.

Move away to somewhere cheaper (we have thought about this extensively and anywhere we have found we would like to move to with a decent commute isn't any cheaper one commuting costs are factored in).

So I suppose I'm asking - should we just go for the increase in mortgage and keep fingers crossed despite all the economic uncertainty?

And (cheeky question) if you live in South London - how much do you pay a month on your mortgage?

So, we are also looking to increase our mortgage (when we bloody find somewhere) we have a rough idea of what new repayments would be so I've told DH we should overpay our mortgage by that amount, a sort of trial of living with a bigger mortgage and the added bonus of decreasing our current mortgage. (We specifically changed to a mortgage we can overpay at will because we were capped at 10% a year before).

Personally I think a £2k mortgage on a net £6k income is totally fine. It is only 1/3.

Are there areas you can cut back on if you did need to?

But is now the right time to make a big move, I don't know. Have you tested the water and see what properties are doing near you?

give you mortgage a stress test test with a 5% rate. I'm guessing this would add around £700 for you (assuming you could get 2% ish fixed now).
I've you are happy paying this when your fix ends (if that's what you do) then all is well in the world.

just to add we have a 1/3 mortgage cost / income in south west outer london too.

Our mortgage is 1/3 of our take home pay so £2k on a £6k income seems fine to me

Thanks for the responses, it's helpful to know that as a proportion of our income it's reasonable. We could definitely cut back on other spending if we had to as well. I've spoken to a broker and based on our current circumstances they would lend far more than we would want to borrow so I'm assuming I'm being on the cautious side. It's just £2000 (or more with rate rises) seems such a huge amount but maybe I'm naive!

Wrt the property market round here, I'm keeping an eye and it seems the same as much of London at the moment, very slow, lots of reductions. However I'm assuming that whatever we lose on the value of our place we would be equally able to reduce off whatever we buy so hopefully it would work out ok.

Thanks for the responses, it's helpful to know that as a proportion of our income it's reasonable

Also it is much easier to spend 1/3 of £6k on housing than 1/3 of £2k on housing - because there is a 'minimum' amount you need for food, utilities, clothing etc. You have proportionately a lot of discretionary spending in your £6k than someone on £3k.

Sadly, £2k a month mortgage in the SE is not uncommon at all (the only people I know who are paying much less than this either had a large deposit from family money or benefitting from the property boom previously or bought years ago).

Yeah that's fine. I'm also in SE London (blackheath/greenwich) and our mortgage is £1100 plus home improvement loan of £430 (for 3 years) and we have about £4300 coming in.

I think it's a great time to move, not that much on the market but I think they look fairly bargainous compared to a year ago.

If you say your maximum budget I will have a look in my area - I love it here so much

We did it to move to our forever house, not a huge mortgage increase but it was worrying as our last one was so comfortable but the house was too small. We have been here 7 years now. It was worth it.

You haven't said how old you are which could affect how much you can borrow, maybe look at the term of the mortgage too.

We can afford to overpay but don't. We have two children aged 14 and 11 and want to make memories with them so holidays and days out are more important at this point.

Plus we have done a lot of work to the house since we moved in (extension, garage conversion, landscaped the garden, all new windows, boiler etc) which eats up a good chunk of money too. But we are not in SE, we are ooop norf where £250k gets you a 4 bed detached house.

This seems fine to me. We moved (within SE London) from a 3bed to a 5 bed fairly recently and increased our mortgage by £450p/m to do it (and the stamp duty - don't forget that). We now pay £1900p/m. This is 2/9ths of our net monthly income but I am super-cautious financially.

I think now is good time to buy in SE London. Prices are definitely readjusting in the larger family home market. We looked at moving out, but like you, liked the area and wanted to preserve a decent commute to maintain our family life.

See if you can put aside what the difference in the mortgage would be each month. That would help you see if it's a make or break sum. How much would commuting costs be? If they're more than the mortgage increase, don't move out (unless you have non-financial reasons for moving).

Laurie - I love Blackheath but we are Forest Hill and keen to stay v local because of the schools. Budget is up to around £750k - which isn't a huge amount round here TBH.

I am 36 and DH is 40 so we are ok from a mortgage perspective. I think our aim will be to save as much as we can and try and buy somewhere that we can e.g. Do the loft, so when it comes to the end of the fixed rate we should hopefully have a better LTV and be able to remortgage at a decent rate.

I'm feeling a lot less stressed now realising that this is probably just normal for people of our age in our area!

Forest Hills lovely I think that house in Stanstead road is good value for £615. It's got over 1000 square feet which is the magic number IMO - so many crappy places at 800 or less

The one I had my eye on has just gone under offer...

Cranston Road London SE23
www.rightmove.co.uk/property-for-sale/property-58944814.html

So we should probably get our skates on as stuff is selling at the right price. Was thinking September would be a better time to go on the market though

Jesus, having 4K left after paying your mortgage seems like an enormous amount to me. Would say you can definitely afford this.

@LittlePickleHead ooooh that IS a nice house!

How about this:

www.rightmove.co.uk/property-for-sale/property-48776478.html?

or this:

www.rightmove.co.uk/property-for-sale/property-67147211.html

or this:

www.rightmove.co.uk/property-for-sale/property-48345471.html

Forest Hill looks good value compared to some other parts of SE London!

Number 2 seems a bit limited in scope to extend, but the other 2 are already on my saved list.

I think it is good value compared to a lot of places, it's such a lovely place as well!

It's staggering what you pay in London. I suppose it's all relative.. and you get used to the prices but 3/4 million for a 3 bed would make me cry!

Slightly lower mortgage to you, similar ages. Slightly higher takehome but gone from £450 a month to nearer £2k when you include mortgage protection. I think it's psychological because you know you can afford it,it just feels huge.

Get your LTV as low as poss then fix for as long as you can if you are concerned.

Hi OP I'm in a similar-ish position. Also in London. We've sold our trendy 1 bed and moving to zone 3 in east London to a 4 bed house for 700k. Mortgage will be just over 2k and our combined income is around 6k. We don't have kids yet and we're trying to move to our long term (if not forever) home and get a big mortgage while we're young. The financial risk scares me because I earn twice what DH does, so feel like it's my responsibility! But as it's a long term thing I hope it will pay off. Like a pp said we're getting a 5 yr fix.

@harrietm87 Zone 3 east london is where it is AT :-)

We're in Cheshire, slightly older than you but with similar numbers. It does seem like a lot of money but for us we're here for the long term and we love the like its given us with neighbours / schools etc.

We're in SE London and pay about £1300 a month for a slightly bigger semi, but we were lucky to have benefitted from property price rises with our last house. 2K a month sounds a lot and local friends have mostly got smaller mortgages than this (around 300k in total seems to be the average). The Cranston road house looks lovely and a good price for the area.

I think that sounds absolutely fine, although I would want to have some back up savings of say 6 months mortgage payments in the event that your partner did lose his job.

I also thought the rule of thumb was 25%-30% of GROSS income rather than net.

Also consider that the majority of lenders/thought leaders think that mortgage rates are going to rise quite soon so you would be better making this move now and securing a lower fixed term deal than waiting a couple of years.

£2000 from net £6000 is fine. If it was gross £6000 I'd say no way!

We have looked at moving to a bigger house but the jump for me is just too much. We would literally be paying £300k more than we paid for our current house in 2011 for a box room and a larger kitchen to what we have with our 2 bed house

I'm glad we don't feel like we are bursting at the seems because then I think the pressure feels on to accept the move at any cost.

I would wait a little longer personally as I can see in my area of SW London house prices are slowly dropping (I prefer to say becoming a bit more sensible!) and you may get a house for less than you're willing to pay now.

Just my opinion of course and good luck with the search