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!

Why would you 'have to stop working'? If you do, that's a big mortgage for your DH to have to fund on his own.

You're on a very good salary, which suggests you have your own career - don't give this up if/when children come along! You will be able to afford decent childcare, even with that mortgage.

If it's a dream house, then it sounds like you won't need to move again in the (near) future, so over time, as you pay off your mortgage and salaries rise, it will become an increasingly small part of your take home pay.

But don't give up your career!

You can afford house and if it is your dream forever home if say, go for it. If children come along you will have s spare room for an aupair or live in nanny. You could work part time when babies come and go back to full time when they go to school. Fix the mortgage for 5 or 10 years so you know what your outgoings will be and get critical life insurance incase of severe illness.

Benediction we are just like you we chickened out of buying an amazing home, it was truly beautiful with an enormous garden, you could have built two houses on. A year or two later I became seriously ill and had to retire., fortunately I have a decent pension. So I’m so glad we didn’t get another mortgage as had paid ours off.

We have had some lovely holidays, I can pay to see an osteopath when I’m in agony and it’s £50 a session. I also had some private therapy which was incredibly expensive to come to terms with my life changing illness.

My friend has had an experience very like your parents, beautiful house but nothing spare at all. Really good jobs and a high income but they couldn’t afford a holiday for years,

No way would I take on that amount of debt on your income. Especially with that ltv and a plan to have children that will either involve a reduction in income or childcare expenses.

Slightly confused that you mention savings, if you have significant amounts of savings wouldn't you be better putting that towards the house?

It does seem a big mortgage in relation to equity - as others have said.

The term 'dream' house is worrying because it suggests something out of the ordinary and a sort of luxury , special property. If it's a splendid luxury house compared with its neighbours and the average for the location, then, if resale were necessary, it would attract a smaller pool of potential buyers. On the other hand, if it were a standard run of the mill, three-bedroom terrace/ semi property in an expensive part of West London, then there will be more buyers. But a house for that money, with, say, five or six bedrooms and various en suites will be appealing to the richest in your area. On top of that, any niche features, such as vaulted ceilings and garden woods, while making the property richly - appealing, will further individualise and limit the number of interested buyers.

So beware of falling for a dream, and not taking account of pitfalls, in the form of changes to mortgages or to the industries in which you and DH work.

At those salaries, it probably makes more financial sense for your DH to go part-time after children. The threshold for tax free childcare and 30 hours childcare when the child is 3 is £100k. That's a lot of financial help to miss out on, especially if you have more than one child. Factor in the loss of the personal tax allowance over £100k, and you might well be better off if DH drops to 4 days a week and gets his income under £100k.

And, if I may be blunt, for a couple in their thirties/forties with those salaries, you don't have very much money saved up. What have you been spending it all on?

I'm quite surprised at the nonchalant talk of 'dropping a day' by several PPs as if that's automatically going to be acceptable to employers.

If interest rates go up it will be difficult. And there will probably be a levelling off or even drop in house prices. No I don't think I'd go to the very top of my budget in your circumstances.

@CrimsonImp

No way would I take on that amount of debt on your income. Especially with that ltv and a plan to have children that will either involve a reduction in income or childcare expenses.

Slightly confused that you mention savings, if you have significant amounts of savings wouldn't you be better putting that towards the house?

Our savings are helping increase our deposit to £200k

@AnAnxiousSeagull

At those salaries, it probably makes more financial sense for your DH to go part-time after children. The threshold for tax free childcare and 30 hours childcare when the child is 3 is £100k. That's a lot of financial help to miss out on, especially if you have more than one child. Factor in the loss of the personal tax allowance over £100k, and you might well be better off if DH drops to 4 days a week and gets his income under £100k.

And, if I may be blunt, for a couple in their thirties/forties with those salaries, you don't have very much money saved up. What have you been spending it all on?

We only started making these salaries around 3 years ago, we have a property investment abroad which we are planning on selling and bring in to cover around £100k

@HmmmmmmInteresting

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

This is true

I wouldn't... I'd sooner overpay and clear the debt quicker.

@CrimsonImp

No way would I take on that amount of debt on your income. Especially with that ltv and a plan to have children that will either involve a reduction in income or childcare expenses.

Slightly confused that you mention savings, if you have significant amounts of savings wouldn't you be better putting that towards the house?

In many cases savings especially in ISAs and stocks and shares portfolios are earning significantly more that the cost of the interest. In our case, we could save £1100 in interest every month but our joint saving earn over £3k interest free most months.

And if interest rates were to go up we can always reconsider.

Would you get a longish term fixed mortgage?

Name change fail @anaym?

@smallgoon that's what I meant? We're overpaying on a 30-year mortgage. This gives us more flexibility than getting a 25-year mortgage, where the monthly repayments would be higher.

In many cases savings especially in ISAs and stocks and shares portfolios are earning significantly more that the cost of the interest

That's the case for us but I'm not sure it would be the case at the op's ltv, although maybe they've got a really good deal

The time to work out your finances and think about the future is before you put an offer in - not after it’s been accepted.

@SofiaMichelle

I'm quite surprised at the nonchalant talk of 'dropping a day' by several PPs as if that's automatically going to be acceptable to employers.

It might not be, but they have a legal requirement to consider such a request if made by a parent. I would imagine a lot of employers would rather seek to accommodate it than risk losing the employee, especially in OP's salary bracket.

Oh give over! Some people are in perfectly secure relationships where even if DH did leave or was left, would continue to contribute (in my case he would give everything he had to make sure his DC were okay).

And even if the worst happens, that isn't to say you can't go back to work later. In fact I am currently writing a policy for my company to actively market ourselves for return to work parents because we recognise its such an untapped talent market. High wages and incredible flexibility.

I had planned to be a SAHM but when this offer came and meant I could WFH (pre covid) around the kids it was too good to turn down.

BUT there are infinitely more important things in life than work and even than money, so lets wind in the judgy 'stupid' comments because plenty could use the words selfish and greedy about working mums. Which would also be entirely unacceptable since every woman is entitled to make their own choice.

@Notthissticky that is the case for any employee, not just those with children. Anyone employed for a certain amount of time can ask to change their hours, and every employer must consider it, but they can refuse if it doesn't suit their business needs.

It is fine, you are just getting normal cold feet

[quote overwork]@Notthissticky that is the case for any employee, not just those with children. Anyone employed for a certain amount of time can ask to change their hours, and every employer must consider it, but they can refuse if it doesn't suit their business needs. [/quote]
I've just checked on gov.uk and you're absolutely right! No idea if it's changed since I had my first or if I got it wrong in the first place🤷‍♀️

That does sound like a large and long mortgage for your DH to take out, and a high loan to value rate.
I would recommend you go to see a financial adviser as you need to look at this in the round including savings, pension contributions (esp since he is 45) and likely childcare costs/ loss of earnings (££££).

I was agreeing until you said that DH was 44 - that gave me pause. We are around that and actively want to start downsizing the stressful jobs - you dont have that option with a massive mortgage. You would have to move which is completely disruptive.

All depends on your attitude to risk really doesnt it.

I would think about your projected earnings in 5 and 10 years time. From your ages, you (particularly your DH) were relatively old before you started earning a decent salary but only you know the potential for progression. The age of your DH is a cause for concern with such a long mortgage though - you're limiting your options hugely, particularly for early retirement, unless you both have the maximum invested in your pensions already.