How much would you borrow in our circumstances?

[OUB1974]

We have a very large deposit from the sale of our old house and we have moved north so the money could cover the whole of our house purchase. However, we also have a low income and wouldnt currently get a mortgage. There is the offer of a loan from a family member and my dh and I are in slight disagreement about this. (There would be no issues with borrowing this - basically we would pay interest on the loan, have a proper agreement in place and we are all very fair people anyway. If we lost our jobs we would pay interest only for the duration of this and anything left over to pay if they died would come off our inheritance of the sale of their house).

So small 2 or 3 bed houses start at around £160k. We have around £200k. We could either stretch to a bigger house or a really lovely forever 3 bed semi with a huge garden if we borrowed 20k.

I think we should take this opportunity. Repayments would only be 120ish a month anyway and we're not likely to earn a lot long term, so I think we should go as high as we can at the moment. Dh thinks we should either stick to, or go below budget and not borrow. The compromises would either be smaller house, small garden and a less nice road (although this same area).

At the moment nothing is in the market, so we have yet to test our differences in opinion on an actual house. Dh is unemployed and I earn just shy of £1000 a month. We are both hoping to work part time as the move is partly to scale back our costs and work and spend more time with our children. So household income is unlikely to go over around £1600 per month. Before we had a higher income (£3000 per month) but a very large mortgage (for us) so overall the difference is negligible, although as we have no pensions now and did in our old jobs this is also something to consider as we are in our late 40s.

WWYD? Stretch and borrow a small amount to get a better house, or stick with budget?

If I was only brining in 1k a month no I would not borrow twenty I agree with your husband.

In your position I would really do my homework on property prices in the area you plan to move to and buy something outright that's the most likely to increase in value and then you don't have unnecessary outgoings while you get back on your feet.
A grand a month is nothing really, you can't afford to successfully borrow and live on that - even up north.

I wouldn't borrow anything in your situation.
Mainly because of your ages and very low income.
I wouldn't choose a huge garden over pension and savings.

So you’d be borrowing from family, with very flexible repayment terms, and not taking out a mortgage? Borrow whatever all of you agree on. If you can’t all agree, don’t borrow anything. It seems like a bit of a non question because it’s so esoteric

I wouldn’t borrow more. It sounds like you can buy an adequate home without borrowing so that would be best as no financial pressure. Your husband is unemployed and you want to both work part time so understand why he is not keen to borrow more. Maybe find a property within your budget with potential to extend in case your finances improve considerably in the future.

In your position I would want the security and peace of mind of being mortgage free. Could you buy something that needs work/ has potential of loft diversion to create 3rd bedroom in the future? Then you could get a new mortgage when you need it.

That’s a tiny ‘mortgage’ and you’re only in your 40s. I would borrow it. The nicer house will likely have higher growth in value so you could downsize later on if you need to.

Buy the best house you can for your cash. Don't get a mortgage.
You don't need a huge income once you have no mortgage to pay.
Add up your bills including council tax and food. Ours only come to £850 a month.
We live comfortably on my part time income alone. If something came up and I need more money I can always take on a couple of extra days a month. It hasn't happened in the nearly 7 years we've been mortage free.

If I had just shy of £1,000 pm to look after a family, I wouldn’t take any additional loans.

Thank you for the replies, given me a lot to think about and maybe we shouldn't borrow to the max. I suppose it's not all or nothing- if something becomes available and we have to borrow agrand or two, then that be better. We are probably better saving the offer if a loan in case we need a new boiler or something like that. I suppose in my mind, I was thinking that £150 per month for housing wasnt too much. But nothing is better and allows us to save for emergencies and retirement.

There are basically 3 types of houses available to us - the original ones on the estate, with lovely gardens and around 100 years old. These would tend to go for probably 10 or 15 over our budget, but there are so few of them at the moment it could end up in a bidding war as they're very desirable. Then there are a lot built in the 70s. Ugly but ok gardens and generally the lowest price, up to our budget, but a smaller one that needs work might go for 50k below. Then houses around 20 years old that are pretty but on tiny plots and cramped streets. And the rooms are tiny too. We saw a few last year and I didn't like them at all.

I'm wondering now if we could go for a 2 bed of the nicer houses and then extend in a few years. Or go for a sensible one in group 2, but then we wouldn't be able to extent as much.

Hopefully dh will get an ok job. Absolutely nothing is on the market at the moment and the prices seem very variable, I cant quite work out what's going on. Sometimes they come on the market and hang around for ages before drastically dropping the price. Then others, that seem very over priced, go in a few hours! I don't want to panic and over spend. But I also don't want to loose out for the sake of a few grand, or to buy something small and cheap and end up wishing we'd waited. Or to wait too long and have prices go up. It's an odd situation to be in.

Would your family be prepared to give you the money outright, with an adjustment to be made to your eventual inheritance?

Yes you're only bringing in £1k per month but you will have no rent or mortgage! Considering that a lot of people spend 30-50% of their income on housing, it's more than it seems.

If you are paying it back at the rate of £120/month though, it's going to take you 14 years to pay it back, not including interest. So you might as well see it as a kind of rent payment.

If you want to be completely free of financial obligations, I'd not borrow. If you think you might increase your income then go for it.

I think it’s clear you really want to borrow it op and get the better house.

But this leave you what, 850 quid a month total income? No savings? What happens if the boiler goes, or the car,or there’s a plumbing issue? A problem with the electrics? What about when the kids need stuff. How will you pay for it? Borrow more?

As your husband is unemployed, I’d go for the ugly house way under budget and he can use his time doing it up, fifty grand goes a long way. New kitchen, new bathroom, flooring, decorating to your choice, new furniture, patio in the garden, whatever you need., You can make it beautiful inside and do the garden up,. What does it matter what the outside looks like you don’t need to look at it.

But you could do the inside and garden to exactly your tastes, still have money left over, and if you still needed to borrow for an emergency then the money is there. Plus that extra one hundred odd quid a month you can save, or spend on the occasional treat for yourselves.

Given that there’s no real impact of the loan ( i.e no foreclosure etc) Is suggest you go for it. Because you have no other housing costs - bills etc should add up to £300. That’s still a fair amount left for everything else.
Also how many children and how old?

I would borrow and buy your 'forever' home, I can't see why you would both work part-time.

I don’t think that you should borrow from family to enable you both to work part time. Working part time is a choice you are making, and the consequence of that choice is that you can’t afford your “lovely forever” house. It doesn’t seem right to then take money from family to enable you to have your cake and eat it, as it were.

I appreciate that the intention is to pay it back over time or take it off your inheritance, but it still smacks of getting your family to fund life choices that most people do not have the luxury of making.

It’s interesting that your husband is the one opposed. He doesn’t want to be subsidised by your family and would prefer to be independent, is my interpretation of that.

Any children?

Thank you for all of the replies. We have been talking about it a lot and I'm definitely coming around to his way of thinking, especially reading all of the views here, which have made me see the bigger picture and less single minded about the "dream home".

One of the reasons we've moved is for a better quality of life and seeing more of each other. He is hoping for 30 or so hours per week and I currently do 15 (I could increase slightly but that would be eaten up with after school clubs, although once dh has a job I might be able to increase on the days he is at home).

It's a case of seeing what comes up, but I'm definitely trying to reign in my expectations and buy something more within our budget, maybe even below so we can think about our retirement. Kids are still primary school age so at the moment we want to be around as much as possible.

Thing is, my family are keen to do this, as they want to see us in a good house. But maybe we should save the offer just in case something does go wrong, like broken boiler or car.

There has be absolutely nothing on the market in 3 months so it will be interesting to see what comes up next - there are so many variations on price, size, location, condition etc. that it's hard to second guess how we will feel. My hope is for a very shabby and cheap older or 1970s house that we can do up a bit. I will report back...