Getting cold feet after property accepted. How much is too much mortgage?

[anaym]

Hi

We’ve just had an offer accepted on a dream house for £990,000 with a deposit of £200,000.

DH makes £130,000 and I make £90,000 which nets us £8000 monthly after taxes.

We are now very comfortable as we live in a 2 bed flat with a £1,600 mortgage without children, as we have been working from home we decided to buy a house and got the £990k offer accepted which means we will have a £3,100 mortgage to pay off.

We can do that now but are scared that when kids come and I have to stop working our new net of £5500 won’t be enough for family and house.

Should we consider a cheaper property even though is not our dream house and we would have to move further away?

Thanks for your wise words and advice in advance!

Are you certain you want to stop working when you have children? On your salary it would make far more financial sense to keep working, even if part-time. We also have about £2400 for everything after the mortgage and we spend it all every month

My phone was playing up. I should add that our combined take home pay is about £3200 pcm and our mortgage just over £700, and childcare fees currently around £600. I think we have a rather different lifestyle. £2400 for everything after the mortgage and no childcare sounds lush to me, but I'm not you... How will your career be affected by becoming a SAHM? Is your house likely to increase in value? How secure are your jobs? All things to consider

I'm guessing you've taken it out over a really long time, because a £3k mortgage sounds very cheap for that price of house/LTV

@HmmmmmmInteresting

I'm guessing you've taken it out over a really long time, because a £3k mortgage sounds very cheap for that price of house/LTV

I don't quite understand how interest etc is calculated on mortgages, but op has in excess of 20% deposit and a mortgage of £790,000. Our repayment is £720 on a mortgage of £180,000 over 30 years. OP hasn't got kids yet so probably of an age where a 30 year mortgage is on the cards. Yes, it's long but we would rather be overpaying on a longer mortgage than having higher monthly repayments fixed.

Yes, it's long but we would rather be overpaying on a longer mortgage than having higher monthly repayments fixed.

This is true

I don't think I'll be much help. I chickened out (ie didn't carry on with the process rather than screw over any seller!). Despite earning a higher salary, with a very high deposit I was so scared of the pressure and the what-ifs. However, life is too short for what-Ifs!! Do it!!

Some thoughts -

Have you priced up council tax and estimated utility bills? These might be high on this sort of property and could make your estimated £5500 income seem not quite up to it once you have kids to look after at home.

Have you looked into some sort of income protection or payment protection. With such a large mortgage, the risk of you failing to meet a monthly payment if one of you loses a job is higher than on a much smaller mortgage where you can muddle through a tough spell.

Is there any flexibility with your job to go part time or compress hours if you have children? I worked from when DD was around 4 weeks old by employing a babysitter to come to the house (I worked from home) but only for a few hours a week and gradually upped it through that first year. She's now 4 years old and I'm still only working 3 full days a week. If you can work things flexibly with your job it means you needn't lose all your income when kids come along.

If you know that this house is in the perfect area for you and you have good friends or family there then I would push to live in the area you want to. I think it's more worth compromising on the house than the area.

I think also you need to consider when you'll start TTC. If you've got a few years I'd over pay like crazy and get your mortgage down.

I'm a very restless person, I'm currently dreaming of moving again and we've only been there 2.5 years.

I personally will never have a 'forever home' but if I knew for certain I'd be happy to see my days out in the one place, I'd go for it before dc!

Do you manage to save a lot now? Is the £200k deposit mostly savings, or equity from your flat?

The general rule of thumb is to aim for mortgage payments no more than 30% of take home. Yours would be 38%, but you have a much higher income so more disposable cash depending on how you live - eg do you see yourselves paying school fees (extra £1-2k per month per child), do you finance expensive cars, have expensive holidays multiple times per year?

Would you give those things up if needed and still be happy in the house? What if the interest rates went up to 5% - new mortgage would be about £4.6k per month
At 10% interest it would be £7.2k
Unlikely to get that high, but worth thinking about!

I'd be tempted for a dream house, lock in a 5-10 year mortgage rate if you were sure it's a long term house (put you can usually port the mortgage if you have to move, as long as you still earn enough) and I'd plan to overpay significantly before having kids

Our take home pay after our mortgage is just over £3000 and we live comfortably, holidays abroad, kids spoiled (we have two), go food shopping without worrying about the bill at the end, eat out regularly etc etc. I wouldn’t say we are ‘rich’ by any stretch of the imagination but we both grew up in households where we had virtually nothing (think threatened eviction due to rent arrears fairly regularly…) that we feel extremely lucky.

I know living costs vary throughout the UK but that is a MASSIVE amount of spare money. It’s more than most couples would even dream to make on their combined salary let alone just one earner.

We have a slightly higher net income to you and a similar value property, but a much smaller mortgage. We pay about £1800pcm, but are currently more than doubling it in overpayments (longer term job security questions for DH and I earn far less than you). It’s actually pretty manageable, but the utility bills are pretty huge. And if it’s a period house then the upkeep too.

I think if your wages are likely to increase over time then it’s not a bad idea, the sticking point for me is that you haven’t yet had your family (we had two overlapping nursery bills at one point which was £££).

So I’m on the fence. The mortgage is very big and it doesn’t give you much room for overpayment. What if you went to £750k and waited out the baby years? Depends on the market in your areas of course.

Sorry I’ve just reread and not sure whether your £5500 is before or after you’ve paid the mortgage or not do my points above may be moot

That is a lot !! My dh earns similar and I can't get him to move ( we have nearly paid off our small mortgage ) because he is so sensible . I admire your bravery , you can always downsize or relocate if it becomes too much !

If you could save up before you have kids it would be ok. Otherwise it would be too tight for my liking if you're looking at income of 2400 per month after the mortgage payment. Your lifestyle would have to change a lot to go from disposable income of 6400 per month down to 2400 per month, with extra people to feed and clothe aswell.

I wouldn’t do it on those salaries. It would constantly stress me out being in that much debt and for so long.

We’re in a similar position as you. Could have gone for a million based on affordability from bank settled on a 675 house because why give yourself that stress. I would urge you to look at cost of childcare sooner rather than later. Nursery for one for us is 1700 a month. I’ve seen so many people over stretch

I think that's quite a stretch if you plan on giving up work if you have kids. And even if you don't you will then have childcare in the mix.

Eh? Why would you give up work when you have kids? That makes no sense.

@Carpetdrought this! We bought 300k under what we were told we could “afford”
Just because you can afford a much larger debt, doesn’t mean you should.

@WaterBottle123 why doesn’t it make sense? Lots of mothers want to be a SAHM when they have children.

@Willwebebuyingnumber11

Because being financially reliant on a man is placing a 50 percent bet on being left alone with no income. And she hasn't even had kids yet and she's planning to sacrifice her career while the husband continues uninterrupted.

Just because it's a societal norm doesn't mean it's not batshit crazy.

Fix the mortgage for a reasonable time, work out childcare cost would be, see if you could afford it then. There might be current luxuries that naturally go when you have children too.

Your take home is lower than I’d expect for those salaries so paying quite a lot into pension too? Great. But possibly could flex that in lean years?

Job security? Promotion prospects? Not overpaying on the house?

I’d go for it if possible though, I wish I’d stretched more when younger and child free.

[quote WaterBottle123]@Willwebebuyingnumber11

Because being financially reliant on a man is placing a 50 percent bet on being left alone with no income. And she hasn't even had kids yet and she's planning to sacrifice her career while the husband continues uninterrupted.

Just because it's a societal norm doesn't mean it's not batshit crazy. [/quote]
Same. Very bad idea to give up your job.

I would carry on working and buy the nice house. Assume your jobs are stable. We have redundancy insurance but new policies are held at the moment due to pandemic.

It’s a lot easier to get a longer term mortgage when you’re young. You could fix for 5-10 years at historically low rates and overpay by 10% a year. Over time mortgages always get easier. I wish we’d upsized earlier in life.

It might seem like a very long way off, but also research schools. We bought our 'dream house' 3 years pre-kids, but quickly realised the childcare and schooling options were rubbish, so ended up selling up and moving to a lesser house in an area with amazing schools.

The school issue comes up far too quickly after kids arrive and it's more difficult to unpick once you've settled in an area with friendship groups (both yours and the child's), extra-curricular activities etc

School fees might also need to be budgeted for if you're going down that route.

[quote WaterBottle123]@Willwebebuyingnumber11

Because being financially reliant on a man is placing a 50 percent bet on being left alone with no income. And she hasn't even had kids yet and she's planning to sacrifice her career while the husband continues uninterrupted.

Just because it's a societal norm doesn't mean it's not batshit crazy. [/quote]
Even if 50% of marriages ended in divorce that wouldn’t mean any particular person had a 50/50 chance of getting divorced. That’s not how probability works.