Are we stretching ourselves too far?

[Belinda2000]

My husband and I have been property hunting for a while now, without finding anything we really fell in love with. We started looking in a higher price range just to see if we would have more luck, viewed a beautiful house a few days ago, ended up offering the asking price (lots of competition) and our offer got accepted. Now that it starts sinking in we are really concerned that we are stretching ourselves too far. We are on a combined salary of £120k, have a deposit of around 185k and would therefore need to borrow 675k to buy the house for £860k (we are first time buyers). While the monthly repayments shouldn't really be a problem, we are concerned about all this talk about future interest rate hikes and what it would mean for us once we will remortgage such a large sum - we would probably for for a 5 or 7 year fixed but still we feel so exposed.
Are we overthinking this or just getting cold feet? Has anyone borrowed similar large sums?

Have you found a lender that will offer you over 5.5x your joint salary?!

No comment on the amount of borrowing, I’ll have a think about that.

However, have you considered a longer term and then make overpayments ie your commitment is lower to mitigate risk but you pay as if a shorter term so you build up more equity. Most mortgages allow overpayments of up to 10% of the balance per annum.

@namechange30455 Our joint salary is £123k so we are literally just on point for the 5.5x

@Jarstastic Yes we are looking into this however with a 10 year fixed we the monthly repayments will become more challenging for us. The maximum really we could comfortably go to is a 7 year fixed. We roughly made the maths and with our current rate of savings we would still be left with a loan of around 480k after 7 years which seems a lot not knowing what the interest rate will look like

Are we stretching ourselves too far?

Yes.
That is bonkers.

Borrowing a high multiple when that is the only way to get any property, and doing so as your mortgage would be less than your rent makes sense.

Borrowing £675K when you could easily get a more affordable property does not make sense when it means borrowing 5.5x joint salary.

We are on a higher combined salary than you OP by about 20k. Similar deposit. Looking at a property for 650k. I wouldn't want to go much above that.
Also check that you can actually lend that much!

Mental. Also have a similar joint salary and no way would we want a huge mortgage like that. Do you have children?? If not have a think about if you planning on having them and what you think it will cost.

OMG

Our household income isn’t far off you and ive more than that available as equity

I am SHITTING myself reading this but I realise I’m massively financially risk adverse. However I wouldn’t sleep at half that mortgage.

Then again I’m in Scotland so it’s easier....

Longer term would be for example 28 or 30 years. Rather than 25 years. Not the actual fixed rate term. The longer term would lower your monthly payments but enable you to overpay the 10% a year.

And yes, that is crazy. I'm so glad we didn't stretch ourselves. There's enough stress in life without adding to it with a crazy high mortgage

It sounds a total and complete overstretch to me. With that massive mortgage it wouldn't take much of a rise in interest rates for your repayments to go up substantially.

A quick Google suggests that over 25 years your mortgage payments would be in the region of £3300/month.

On your joint salary that feels like a lot, with not much 'wriggle room' for redundancy, illness, unexpected expenses, childcare (if that might be something that you need in the future).

On paper it looks manageable but I would be very nervous committing to that amount each month.

That s a hefty mortgage to pay after tax
And upkeep and repairs
Are you counting all that?
What happens if you have dc childcare costs?

It depends on your other outgoings, but I wouldn't feel comfortable borrowing so much. Through life altering illness I suddenly lost so much of my earning potential so it's led me to being more cautious. I prefer to save and live below my means now, as if I blow everything I have then I imagine how much it'll stink to have to readjust if my income drops even more.

Will you have to sacrifice lifestyle holidays cars for the house? Do you want to?

@Belinda2000 your monthly repayments will be approximately £3,500 per month... does that sound like a lot to you or does £1,250 each sound very manageable that you could comfortably pay it ongoing?

We did the opposite of what you’re proposing and borrowed less to buy a small house in a nice spot close to work. Now that we have a child and I am returning to work part time and starting some study I am SO grateful we made the decision we did. You’re really locking yourself into full time, presumably stressful jobs, for the foreseeable future if you borrow loads.

Just read my thread Op, you’ll see everyone on Mumsnet says no

Agree with a pp. It depends what stage of life you're at, whether you have secure jobs. I wouldn't want that level of mortgage payment but that's me. If you're looking to start a family, have you considered how you'll pay the mortgage after childcare / possibly reduced income from reduced hours? I think it's good to stretch early in life when you have fewer commitments, but not to that extent.

I really wouldn't borrow that much on that combined salary.

You don’t need bi-fold doors to be happy.

Think about affordability if interest rates increase especially from such a low rate currently. In the future will you have a family (assuming you don't have any yet), want maternity leave, work part time, pay nursery or school fees.
Just think about not backing yourselves into a financial corner.

That sounds very very tight, I pers on nally wouldn’t sleep well at night with a mortgage that high.

Also need to consider that the bigger the house, the more the costs. My house is a similar value to yours. The bills alone (without the mortgage) are well over £1k a month (highest rate council tax, house insurance, utilities etc). Plus the maintenance of the house because its bigger. Everything costs more.

Our joint salary is similar to yours, we have £300k on the mortgage over 26yrs.

Most of the time this gives us a nice standard of living but tbh at times things can be tight. Our home insurance, life insurance and rates are all huge. It's a large property so stuff going wrong (which it inevitably does) costs £££.

Life would be very uncomfortable for us if our mortgage was over twice the size it is now. I don't want to be paying off a mortgage in my 60's and 70's and so wouldn't look to spread the payments over a longer term.

I work P/T and my DH works F/T. If push came to shove for us financially I could up my hours. We are done having kids so I'm not expecting any maternity leaves or further reductions in working hours.

What age and stage are you at? How long are you planning on taking the payments over and how much do they work out per month? What's your monthly take home pay?

Could you not try to find a smaller house that has potential to extend.
Then have a manageable mortgage and save for the extension.
If things get tight in terms of income you can delay the extension.