Did you borrow the maximum?

[goldpendant]

Inspired by another thread here, I'm wondering how many of you have or would borrow the maximum you're allowed for a mortgage?

DH and I are sort of house hunting, we have a very good equity ratio (80%) in current house but the sort of place we'd like to move on to requires a significantly bigger budget, where we'd be borrowing the maximum allowable and have a LTV nearer 45-50%.

Does that feel comfortable and would you do a similar thing for the 'forever home'? We could clear our current mortgage in 6 years but a new one would see us on a much longer term. We are both in secure jobs, for now.

Guess I'm just interested in how common it is to take in the maximum borrowing vs being much more cautious. We can't seem to decide what to do!

They were common before the 2008 crash and I bought at the tail end of that. I actually got a 97% mortgage and was interrogated by the bank as to why I wanted to put down that much deposit.

No way we took no where near the max and now 6 years later we are only a few months away from being finished it. With the recession the UK is facing I would proceed extremely cautious and wouldn't be taking on anything right now. I would wait at least 12-18 months to see what happens to jobs with after effect of coronavirus. That would be my advice

We are desperate to move as our house is just too small. We can’t decide whether to go for something one bedroom bigger that would do and would keep our payments the same or to go up another bedroom and get more living space too but increase our payments by a good £220ish per month.

Someone said about only having a mortgage they could pay on one salary and while we could pay the mortgage on one of our incomes it would be other things that needed to go if that was the case.

We are almost ready to sell our house now and typically people are being advised to hold tight.

No, we played it safe by taking up less than the max, with an 80% LTV. We knew we'd have years of crippling childcare fees to manage. There's no way we can even think about moving to a bigger house until the kids are both in school and nursery fees are a thing of the past. Annoying, because we'll have to apply for a school place where we are now and then move them (hopefully!) to a school in our new location.

I maxed out first two times I bought as was buying by self. Current house with DH we didn’t but only because we found something we liked which meant we didn’t need to. Current house is selling in 6 weeks and we’re looking for our forever home so we will either max out to buy something “done” or get something which needs work which will probably mean maxing out later.

However we have done the sums to make sure that even on max mortgage, if one of us lost our jobs, we could still pay everything. We’d have to be careful and forgo luxuries for a while (hols etc) but we could pay everything on 1 wage so comfortable with that.

I also took a step back in my career so I could enjoy time with kids resulting in my earning power being about half what it could be. So if ever interest rates went up massively or we were in dire straits I know I could return to that and double salary overnight so we are “future proof” plus we have significant equity in a rental property so I’m comfortable. That said, I’m 42 so thought of another 25 year mortgage scares me, though in reality plan is to pay it off much earlier

No - we were offered £500k (no idea why because we only had 10% deposit that way and we're not earning a lot. Was an oddly generous offer) but we took £330k.

I'm still annoyed about it 5 years on because we could have got a house with a decent garden for that. I love our house - it's perfect in every other way apart from no garden.

But, on the plus side… we're fairly safe if either of us lose our jobs

Nope - we were offered 300k more than we took.

Plan is to pay it off ASAP + with the repayments as they are we will be able to do this quicker.

I cant say i dont still stalk Right Move just to see what we could have had!

Our house was £180,000 (3 bed semi). We borrowed £150,000.
According to lending criteria we could have had a mortgage for around £500,000 due to our deposit and jobs. I prefer our lifestyle now with a lovely house but being able to save and do other things as well

Haven't RTFT but no, I wouldn't borrow the maximum in the midst of the biggest recession since records began.

As as a first time buyer I bought with my max times my salary and 30% deposit. We are now buying a house jointly and we planned for a full times our salary but actually ended up falling in love with something cheaper so have reduced ours to 4X our salary rather than the 5X we were planning

We bought 20 years ago so times were very different but there is no way I would want a max mortgage.

Borrowed to max first time. Second time wanted not to exceed LTV ceiling which would have increased the interest rate. Moved only to make the location more convenient, so pushing to the max at an older age wasn't what I wanted.

@OneRingToRuleThemAll thanks, that seems so strange now!

Max means different things to different people doesn't it? eg someone earning 100k can borrow 5.5 times whereas people earning less can't or have I got that wrong?

We will max for next purchase because no longer paying £700 a month in childcare fees.

I have borrowed the max on my income only and have, thanks to my inheritance, paid it off now 4 years later.
I was made redundant this year and due to Covid and childcare wasn't able to look for a new job yet. I understand now how risky it was to borrow the max (however the mortgage payments were less than my previous rent).

No, but we bought our first house back when everyone was predicting a Brexit house price crash so wanted to be cautious. Also because my job is pretty stable but my partner's isn't. Plan to save and spend money on extending instead, and hopefully have holidays again one day!

Totally depends.
Borrowing to your max on a 35 year mortgage when you are 40 and have little equity and a high LTV and little chance of salary rising = big NO.
Borrowing to your max at 25 when you know your salary will keep rising is quite different.

Personally, I think everyone's situation is different. You have to calculate your spending now and likely spending over the next 10 years. Will there be childcare costs etc? You have to think about likely salary and changes in that. Yes, consider worst case scenario, but if it's fairly unlikely, don't let that drive you entirely - if the unlikely worst thing happens you can sell. That's different to ignoring a pretty likely worst case scenario - don't do that!

Lots of people who maxed out on a first or second purchase before they were 40 don't regret it - if they lived in times of rising house prices and economic boom when their careers did well. Lots of our parents were in these times and now have big houses which they struggled to pay their mortgages on for a short time, but quickly became much more affordable and gave them a big asset.

You have to look at now and the longer eyes a lot of economic uncertainty now, but take a 10 year view of your prospects and situation. It's not good to be hugely stretched and not able to afford to fix the car for 10 years due to maxing out....it's probably okay for a year or 2.

Consider your own financial astuteness. Maxing out can be a thought through plan, for people who've had a financial plan and saved and planned things like childcare, career breaks, career growth, pensions etc. That's very different to maxing out by people who have never previously planned and haven't worked out what is key to be coming in the next 10 years or how they will manage it. You have to decide if you're in the category to be able to manage it or not really ...if not, best avoided.

We borrowed less than half of the maximum and I'm really glad. Covid/furlough/job insecurity has not been the worry it could have been as we can just afford all basic outgoings on one wage. I'm on maternity leave with statutory pay only and I can take the full year. I love the choice and security that not being mortgaged up the the eyeballs gives us!

@WombatChocolate - that's a great summary

we're are looking to borrow 1/3 less than the banks will lend with 45%LTV but that's because we are in our 40s with kids. And it will be great knowing that we can live on one salary if anything does go wrong.

For our first house we had a 95% mortgage and only borrowed about 60% of what was offered to us and I'm glad we did that as our house pretty much went into negative equity due to the crash in 2008. We are just in the process of buying a new house and we are putting down a 20% deposit this time and borrowing about 80% of what has been offered to us. We could put down a larger deposit but we want to use some of the equity from our first house to decorate the new house.

Thanks everyone, this is really useful and as I expected, a range of responses.

For us, I am mid 30's but DH older. We have 80% equity as it stands but would like to make one last move to a bigger, leafier location. Kids are school aged now so no childcare costs and we don't plan to privately educate them.

Jobs are as stable as they can be at the moment and my earning potential should increase, DH maybe has another few big pay rises in him but he'd like to retire at 65.

As far as affordability goes, the bigger mortgage would be approximately 40% of our combined salary (at the moment it's less than 20%).

I think I’d consider it if you save 25% or more of your income currently. That means that even if carrying on with the current lifestyle, you’d save a bit every month and quite a lot more once you’ve had a pay rise.

If, for example, you only save 10%, then you’d need to make significant cutbacks with the new mortgage which sounds potentially stressful.

I borrowed to the maximum level I could when I bought my first house, but I was in my early twenties and was expecting my income to almost double within 2-3 years, so it didn't feel risky (and in retrospect was the right choice).

We haven’t previously but we are on this occasion purely because interest rates are so low. We’re getting double the mortgage we had two years ago and the repayment is only £100 more pcm. So we’ve fixed that for 5 years to make the most of the cheap money. Our LTV is very low - 60% which also attracts better interest rates

@Greenhats10

We buy property to renovate and then sell for a sizeable profit. So it works in our favour to borrow more and free up more cash for other investments, which we generally improve and sell on for a profit.