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 really sure you want to stop working? Do you want to be a stay at home mum?

@Notthissticky I mention it as often as I can as I think anyone should take advantage of it if they so wish - I work a 4 day week and I love it - and I really cannot excuse it on the basis of childcare purposes!

Okay I'll stop going off topic now. I was also onboard with the OP's move when I was assuming they were both late 20's/early 30's, but I'm not certain I'd want to be taking on a mortgage of that size at 44, even with those salaries! Could you find somewhere for less but with the potential to extend? Then if you really feel you need more room, you can do so without moving (and you may have a better idea of the impact of childcare on your finances by then)

Have you checked that the house has decent schools nearby? Also a good nursery? You don't want to buy a lovely house but only have poor schools available in a few years time.

If you're planning on stopping work when you have children, then you need to get a property based on one salary only. Don’t forget, the costs of running a big house will also increase from what you’re paying now.

STOP SPAMMING THE BOARDS @COUPONSEXPERTS!

@Notthissticky

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.

Yes. I know. And not just parents, by the way.

Some posters are not talking just about OP and her salary bracket. There's posts saying "your DH can go part time"..."you can both drop a day"... as if those are definite options.

You can't plan future finances based on something that might well be a complete non-starter. A lot of £130k jobs are just not conducive to "dropping a day" or "part time".

We are currently in the process of doing similar - taking on a >$1m mortgage, which is close to 4x joint income. Have a 4 year old and one on the way. We've gone for a very long term fixed rate interest-only as a protective mechanism, in case of job losses. We'll invest rather than overpay - taking inflation into account, overpaying doesnt make economic sense. If, in 7 years, we can't remortgage, we'll move and downsize!

Personally, I can't see interest rates increasing materially in the next decade - perhaps up to 1%, but even that would probably cause carnage. I actually think its amazing that salary lending ratios haven't materially increased in today's macro environment.

I have moments of worry about the size of the debt we are taking on, but who knows where life will lead us in the next 7 years - we're safe enough over that period though given the interest only status!

However, we definitely wouldn't have done it if we planned to go down to a single wage though.

I think it's always going to feel like a stretch, and unless your incomes are oddly fixed, you'll likely be earning more in a few years.

Your worry seems to be based on when you have children, but (and I'm sorry if this is blunt), that might not happen, or it might not happen for a while, or it might happen and you go back to work.

I wouldn't base your decision on a variable future situation. You can currently afford the house, you have strong earning potential and can overpay on the mortgage or into savings in the next few years. It is sound logic to buy the property.

At very very worst you can sell it in the future if you have to.

It would be worse to buy a smaller place, pay stamp duty, out grow it, and then have to move again and pay stamp duty again. Moving with children adds the complication of moving childcare and schools. I'd stretch now.

Sorry but I think that is a bit tight if you want to take your income out of the equation. However, move before having DC as it is so much harder afterwards.

The only suggestion I would make is to live off your DH's salary only now if you do decide to go for it and save yours until you have children. I would advocate working PT but that is a personal choice for each family.

I live in a 4 bed Edwardian house in London and it is a MONEY PIT.

Bills each month (council tax, insurance, water, gas and electricity) are around £500

Other - internet, streaming services, gym, car expenses - about another £300

Then there is maintenance, we put aside £250 a month for this because there always seems to be something. We completely gutted this house 3 years ago but still there are bits that fall off or go wrong. We know we need a bit of roof replacing (which we stupidly didn't do three years ago to save some money). Sash windows are my current bane.

Childcare costs in London are crazy. My 2 DC are at school but wraparound care for 4 days a week (I work PT now) is still £300 a month. Then there are the school holidays - I use clubs and we take leave but still I put aside £100 a month for this.

DC activities - swimming, music and dance lessons £180 a month

I would say with food and running a car our general expenses are around £2.5k a month on top of the mortgage. This doesn't include clothes, haircuts, days out, holidays, eating out, birthday presents, parties, Christmas etc

Our take home is just under £7k. Mortgage £1,400.

We had a large deposit and so our mortgage is less than half of yours but we still quibbled as it is such a commitment we borrowed over 20 years.
Our theory was that as rates are so low we may as well borrow now and have the enjoyment of more space with the DC (we lived in a flat before) however we save a lot, car is a basic run around, holidays are cheap and cheerful (usually visiting friends and family).

We throw extra into our pensions with the plan being we can use the tax free cash to pay the mortgage off when we can access it or if we don't need it to have a better retirement.

We also have six months expenses saved (£30k) just in case and we have plenty of insurance, especially for DH who is the main earner.

It very much depends on the lifestyle you have/ want.

[quote Notthissticky]@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.[/quote]
Fair enough if it's flexibility you're after, I'd sooner be overpaying on a shorter mortgage and pay off the capital quicker. Longer mortgage term just means you continue to pay £££ in interest over the course of the mortgage.

I would be uncomfortable with that level of mortgage. Interest rates are very very low. What happens if they increase? Then you are mentioning possibly reducing to one salary. Plus the age of 44 comes into play as well.

Personally I would look at a lower mortgage even though you are both good earners, for all of the above reasons. A lovely house is one thing but a nice life is far more important.

Adventuresat40 my DH and I have just retired and we used some of the tax feee lump sum to pay off our mortgage. For us it was a better plan to pay a lot extra into pensions than to overpay the mortgage.

Interest rates are likely to increase - see the surprise inflation figures this week. Mortgages should always be stress tested.

I wouldn't take that on at 44, unless your husband has very good job security. Sadly, in this day and age, middle aged men are often laid off because they're expensive.

We have £3k a month (mortgage paid) with me part time and a 2 year old in part time nursery and we manage just fine and save £1k a month ish. But we have cheap bills and no car payments. And we’re only having one child. It really depends on your future plans and interest rates.

Personally, I can't see interest rates increasing materially in the next decade - perhaps up to 1%, but even that would probably cause carnage. I actually think its amazing that salary lending ratios haven't materially increased in today's macro environment.

I think it's a good job that lending multiples haven't increased as that would further fuel inflation and therefore the risk of rate rises. There's very little to gain from lending multiple increases - houses are a finite resource and prices increase inline with available funding. There are no winners.

If interest rates go up there will be much wailing and gnashing of teeth. And if only we'd known.

@SofiaMichelle

Personally, I can't see interest rates increasing materially in the next decade - perhaps up to 1%, but even that would probably cause carnage. I actually think its amazing that salary lending ratios haven't materially increased in today's macro environment.

I think it's a good job that lending multiples haven't increased as that would further fuel inflation and therefore the risk of rate rises. There's very little to gain from lending multiple increases - houses are a finite resource and prices increase inline with available funding. There are no winners.

I didn't say I thought it was good, just that I am surprised

Apologies @PurpleandOrange

I shouldn't have assumed.

I haven't read the whole thread, and as OP has only posted one message, there's lots of gaps.

Your combined take home seems low for £210k gross, I suspect you are paying substantial amounts into your pensions.

If I were you I would take the mortgage that allows you to buy the best home you can, while you can. Fix the mortgage for 2-5 years, and aim to overpay by 5% during that time. Reduce your pension payments to the minimum during those 2-5 years, so you are reducing your LTV significantly pre-DC.

Once DC come along, you'll be able to remortgage, your property will likely have increased in value, and given the overpayments, your equity will have increased, meaning you will be able to get a more favourable mortgage with lower monthly payments next time round.

Now to read the thread.

Buy the house
You don’t have kids yet
You can always go interest only

@Adventuresat40

Sorry but I think that is a bit tight if you want to take your income out of the equation. However, move before having DC as it is so much harder afterwards.

The only suggestion I would make is to live off your DH's salary only now if you do decide to go for it and save yours until you have children. I would advocate working PT but that is a personal choice for each family.

I live in a 4 bed Edwardian house in London and it is a MONEY PIT.

Bills each month (council tax, insurance, water, gas and electricity) are around £500

Other - internet, streaming services, gym, car expenses - about another £300

Then there is maintenance, we put aside £250 a month for this because there always seems to be something. We completely gutted this house 3 years ago but still there are bits that fall off or go wrong. We know we need a bit of roof replacing (which we stupidly didn't do three years ago to save some money). Sash windows are my current bane.

Childcare costs in London are crazy. My 2 DC are at school but wraparound care for 4 days a week (I work PT now) is still £300 a month. Then there are the school holidays - I use clubs and we take leave but still I put aside £100 a month for this.

DC activities - swimming, music and dance lessons £180 a month

I would say with food and running a car our general expenses are around £2.5k a month on top of the mortgage. This doesn't include clothes, haircuts, days out, holidays, eating out, birthday presents, parties, Christmas etc

Our take home is just under £7k. Mortgage £1,400.

We had a large deposit and so our mortgage is less than half of yours but we still quibbled as it is such a commitment we borrowed over 20 years.
Our theory was that as rates are so low we may as well borrow now and have the enjoyment of more space with the DC (we lived in a flat before) however we save a lot, car is a basic run around, holidays are cheap and cheerful (usually visiting friends and family).

We throw extra into our pensions with the plan being we can use the tax free cash to pay the mortgage off when we can access it or if we don't need it to have a better retirement.

We also have six months expenses saved (£30k) just in case and we have plenty of insurance, especially for DH who is the main earner.

It very much depends on the lifestyle you have/ want.

Exactly this. The house is far to expensive to entertain starting a family. You have the house or kids. And FYI having downsizes considerably, I can tell you it is harder to downsize than never to have lived in such a big house.

[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]
Quite agree

Starseeking the OP has posted lots of times but changed her username.

You'll be fine. After the first fixed term (assuming 5 year fixed) your LTV will be much better (due to higher increase in your house value + repayments over 5 years). This means you can get even better mortgage products then (or in the worst case scenario if rates increase then you'll be where you are now). Totally do-able. Think of it as your retirement investment which is going to sell for a much higher price and fund your retirement. Don't think of repaying the 'whole' mortgage, there is really no need. You repay only until you sell and downsize. And if it's a smart investment then the value increase/equity will pay for your next home outright.