How much should we budget for a house

[DblEspresso]

Hello everyone, need some property buying, financial advice.
We are looking to buy a house in south west London (KT). Kids are already in local primary and secondary schools and we are currently renting. I don't work but my husband earns about 125K annually plus about 10K bonus. We are fortunate to have a saving of around 300K to put up as deposit for a house. We have no loans to pay off.

In our area(like rest of London !) the house prices are really high and we are struggling to work out how much we should stretch our budget to buy a house.
We were thinking of keeping 700K as a budget so that monthly mortgage payments are manageable. But with this budget we are getting very limited options to buy a 3 bed house with garden that has over 120m2 of living space.
So we are wondering that we should probably increase our budget a bit.

How much do you think we should extend our budget without making ourselves a slave to a mortgage !

Only you can answer this as we don’t know what your other monthly outgoings are. There are lots of affordability calculators online or you could go to a mortgage broker and they will work through it all with you to see what’s sensible for your situation.

I've always gone by the rule that three times salary is a very manageable/sensible mortgage. So for you that would be a £705k house. So your original budget is about right. If you want to stretch further then it's about what is comfortable for you and will let you sleep at night.

How much do you pay in rent?
Do you want to spend a lot more more or less? Allocate ££££ extra for repairs improvements and life insurance.
Do you run cars
Want holidays?
Only you know

Have you spoken to a mortgage advisor / broker, to see what you could get?

To answer some of the questions:
Rent currently is 1750 per month + 400 for council tax and utilities
No car loan.
Other are normal living costs. Been less due to the lockdown in the last year.
Have not talked to any broker but the HSBC mortgage calculator says we could borrow upto 615K. So in theory we could buy upto 900K but our mortgage will be over 2500 per month.
That with higher council tax and utlities will be almost half of our monthly take home salary going into the house.

That with higher council tax and utlities will be almost half of our monthly take home salary going into the house.

Half my income in housing wouldn't sit right with me, but it's all about your risk tolerance.

Usually bonuses aren't considered as part of your income for affordability purposes (not with any banks that I've had mortgages/AIPs with anyway)

So £125k x 4.5 = £562,500 plus however much of your £300k you want to put down as your deposit.

You'll need to use part of your £300k for stamp duty, solicitors fees etc I'm sure so you'll need to reduce your deposit accordingly.

@wanderedlonelyasacloud

Usually bonuses aren't considered as part of your income for affordability purposes (not with any banks that I've had mortgages/AIPs with anyway)

So £125k x 4.5 = £562,500 plus however much of your £300k you want to put down as your deposit.

You'll need to use part of your £300k for stamp duty, solicitors fees etc I'm sure so you'll need to reduce your deposit accordingly.

This is true.(I don't know about the bonuses thing, though). My mortgage company use salary X4.49 to give a mortgage. Then obviously this is reduced if you have any loans, credit cards or student loans.

KT is pricey. If you can stretch now I would, rather than outgrow the place and want to move again in a few years. Or buy for £700/750 but put your extra savings into loft conversion. At least that way you can add value.

Clifton Road, Kingston upon Thames, KT2
www.rightmove.co.uk/property/104481440

This is a lovely house, loads of potential - this road has lots of great side/loft extensions.

My bank also uses 4.49 or 4.85 times your salary. This assumes you don't have any other credit which would bring the affordability down. They do have higher multiples but for a select few in qualified professionals, I think doctors are in this category.

I think £800-850k is a more realistic budget for the area for a good family home. Also if schools are sorted would you consider Berrylands/ Surbiton or Worcester Park/ old Malden as you will get much more house for your money there.

You should consider also that you have a very good deposit and could get a much better interest rate with a lower loan to value amount. Interest rates are very low at the moment, so if you lock in a fixed rate with a 42% deposit, which 300k of 700k would be.

Thanks all for your inputs.
@goldpendant - Thats a nice house but the only around 80sqm for 800K. That will be bit small for us with two kids. Putting an extension would be another 50K on top.
@lockdowndramaqueen - Yes I realise that 800K-900K is the least to get anything decent. Berrylands / New Malden have some more choices but they become beyond walking distance for kids and areas are slightly mixed from street to street compared to north Kingston KT2.

Ham is also good location for us but I am worried about the plane noise. Its quite less now due to the lockdown but a few times we have seen them overhead, they are pretty loud.

We also looked at Kingston Hill with some houses near A3 with reasonable price, but again the constant traffic and pollution are a negative.

Realise that need to compromise somewhere or just blow our budget !

Blow your budget!

The better house now will appreciate more in relative terms than a smaller one, we've been watching this happen in KT for years!

Honestly if you can, stretch a bit now. That house I linked is small but huge potential to extend. 'Extended' 4 bed semis in KT2 are selling for £1.2m+ now. That's a decent return. Better than paying stamp duty and fees twice IMO!

I'd blow my budget if I were you. Doesn't sound like you can get anything decent in the price range you're looking at

Is that you Prince Harry?
I reckon about 11 million pounds should just about do it.

Bonuses are considered, at least from my experience they are. So long as you've received one with the same company for the last two years.
Am surprised your partner's bonus is quite low given his actual salary.

Thanks all for your inputs.
Would look at more of 800K range and wait for a reasonable deal to come up.
I understand the other comments. Was afraid of talking about my DH salary, but its only possible to talk about topics like these on the internet to get some honest advise ! Can't comment if bonus is not good but I always felt its reasonable, although he has to work long hours.
Looking at the sky high prices of houses in this area (and London in general) I would assume everyone around me must be earning much more or have been fortunate to have moved into this area long back.

I'd stretch too and be buying something that needed a little work so you've potential to add value.
We're with First Direct, they will accept bonuses/additional pay as long as they are guaranteed.

@TwoLeftSocksWithHoles

Is that you Prince Harry? I reckon about 11 million pounds should just about do it.

Wow, they even shoe-horn Prince Harry into a property advice thread. FFS

DH’s bonus was taken into account when we got our mortgage a couple of years ago, so must depend on the lender.