How far would you stretch yourself on mortgage payments?

[BigFishFace]

In our ongoing saga to move house into a good school catchment area we have found a house that is at the absolute top of our budget. We could probably get a mortgage for it (and we have a large deposit) but DH is worried our mortgage payments will be a stretch too far.

We’ve been through ALL our expenditure over the last 12 months, including bills, childcare, food and frivolous items like nights out, clothes, presents, weekends away etc. If our spending remains the same we would have about £100 spare each month after the new mortgage payments.

I think this is ok, but DH thinks we should be saving money each month. In an ideal world I agree but I’m prepared to reduce our household spending and have no savings to get a decent house in a good catchment. Am I being stupid?

£100 spare a month? No way in hell would I do that

No way, unless you see a major change in your financial situation in the next 18 months (eg family who could take over childcare for free etc).
It's likely that interest rates will rise - even if you fix for 2 years, at the end of that you'll be in real trouble.

Yup. £100 a month left over after ALL other spending, including random frivolous items. How much do other people save each month?

Your DH is right. Please don't stretch mortgage to such limits at all for anything let alone for school catchment!

Ok, I know he’s right! Just so desperate to move house and find a decent school.

How would you deal with unexpected repairs - boiler blowing up, roof leak, car repairs, front door needs replacing? How would you fund things like new carpets or even tins of paint to refresh the decor? Also be aware that if your new house is bigger than your old one it'll cost more to maintain.

It depends a lot on how you've been living for the last 12 months and if you could easily spend less if need be. However we lost out on our dream house and went for one £50k cheaper. I know the people who bought the dream house and they've had a load of substantial bills like a whole new central heating system, which we couldn't have afforded. I'm glad we lost that bidding war.

We currently spend 30% of our income on our mortgage which is pretty high to me but we just did a huge extension and refurb. I wouldn't feel comfortable going higher than that and we still have to watch what we spend even though we are on a pretty high income. No idea what we have left each month - frivolities etc change day to day so hard to budget really!

We spend just under a fifth of our joint income on mortgage, and know that our wages will go up (pay increase on its way at my company). We consider that to be a stretch; you've got to have backup savings for a broken boiler, car etc and be able to enjoy your life as well.

Am I being stupid?

Yes

You don't know what is around the corner. Can you cope with redundancy? Illness preventing work?

With the amount spare you don't even sound like you could cope with a few big unexpected bills which everyone gets let alone anything else.

If we reign in our spending we would probably have nearer to £400 a month left over. Still not enough to deal with major repairs. We currently have a small amount of cash savings (£3k ish) outside of our equity and pension savings etc.

Interesting to know what proportion of wages other people spend on mortgage. Thanks.

Even with your latest update you don't have enough savings and spare cash to cope with anything unexpected let alone a major event.

What is it that you don't like about current house and school? In your situation, I would focus on improving current house with all the little things which matter most and don't cost too much. Same for school. May be the issues with school can be sorted by talking to teacher/headteacher. School ratings are over rated. So much depends on which particular teacher and friends the kids has got as compared to rating of overall school.

It doesn't matter what other people spend in relation to their income. It matters only about your income, how risky your job(s) are, whether you have enough to cope with a redundancy or an illness or an accident, whether you have sufficient insurance for those things (critical illness, life insurance, payment protection etc), expected life of any essentials such as car and so on.

I'm pretty sure there's some guidelines and it's basically That yoir mortgage repayments shpuld be no more than 40% of your monthly salaries combined. (I think).
100 left is fucking nothing, don't do it.

Just worked out that the new mortgage payments would be 30% of household income. But we have massive childcare bills which aren’t going away for the next 5 years. We really have to move house. Neither of us are happy here for many reasons.

I accept that only having £100 (or £400 if we’re careful) left over each month is crackers.

It would be extremely short sighted of you to buy that house. Interest rates can only go up and they will eventually. Will you be able to afford the payments then? Bare in mind also that in most parts of the country the housing cycle has reached peak so if you sell to escape the mortgage you will be selling at a loss. The only way I would consider it is if the rent yield is high enough to give you the option of renting out the house if you can’t afford to pay the mortgage any more or if there is categorically no other school you could send your child to in which case you will just have to prepare to take on debt when the time comes.

A smaller house?

If you are serious about moving, you need to be cutting out those frivolous fiends now and that can go in your rainy day fund. You need to put yourself in a better position.

We are about to size up and refurb. Our mortgage will be 30% of our join income. This feels comfortable for us.

*spends

I am probably a risk taker but I would go for it. Good catchment is very important. You can live without frivolous items for a while. Your income is probably bound to go up and up.
I've stretched every time when bought property and never regretted.

I would go for it too. Get a long term fixed rate mortgage to protect you from interest rises. It’s cheaper than private school and you will have a good investment.

How much is the total mortgage? £3k in savings makes this more worrying to me, you have no backup if you have a few household emergencies, lose a job or the new house needs urgent work.

Could you consider lengthening the mortgage term to bring the repayments down?