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Original poster

Are we stretching ourselves too far?

157 replies

Belinda2000 · 08/10/2021 23:24

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?

OP posts:
Hungry675tf · 09/10/2021 07:21

We've a similar income and deposit and I'm currently shitting myself about a mortgage of 400k with repayments of £1800 so yes I think you're mad. Plus we're post expensive childcare.

NautaOcts · 09/10/2021 07:30

Have you factored in properly all the bills and Council tax that come with a bigger property? We made quite a big jump up (in terms of size rather than value as we moved out of london) and the bills etc has been a shocker.
Council tax £250pm
Home insurance £240pm
Electricity £200pm
Oil £250pm

Not to mention the one off maintenance things for the house and garden and regular help with cleaning and gardening.
Thankfully we have a small mortgage so it’s all doable but we definitely didn’t fully consider running costs.

LeavesOffTheCactus · 09/10/2021 07:32

I think it’s ok if you fix for as long as possible and accept that you may have to move house at the end of your fixed term. You would also have to be certain that the house needs NO work before you move, and gain an accurate picture of the bills before you move. Include

  • your home insurance. Ours went from £300 to £900 per year when we moved
  • car insurance. Ours increased by £100 per year (it could also decrease if you’re moving to a safer area)
  • life insurance. If you’re FTBs chances are you don’t have this. Ours is £1800 per year
  • council tax. Ours is £500 per year more than previous house.
  • utilities. Haven’t had a bill yet but expecting it to double, then double again in April when the fuel price cap is removed.
  • fuel or transport if you’re travelling further to work
There’s probably things I haven’t thought of.

At your level of borrowing I think it’s important to count every future penny if you can to check you can afford it.

Yarqueen · 09/10/2021 07:49

As pp said, I think fixed for 7 yrs lowers your risk. Another important thing is location of where you're buying from an investment perspective. Will the property definitely retain or increase its value where you are, even if the market dips. Also are you in secure jobs and is your salary likely to go up over time? I am living in an area where virtually everybody overstretches themselves because the stamp duty to upgrade to another home would be eyewatering, so I don't baulk at the amounts you've set out. Having said that DH has a much lower risk appetite and I doubt would consent to the purchase based on the figures you've set out. I'm glad we overstretched to the point we did as we won't have to move for another ten years probably.

dreamsarefree · 09/10/2021 07:49

We've moved to a house where our mortgage doubled to levels posters are talking about here. I also agree re the other costs doubling and some months we genuinely don't know where our money has gone. Any household job becomes more expensive with a big house and some quotes we've received are ridiculous compared to our old house (e.g. fixing the loo) as people assume you are loaded.

That said, we love our house and don't regret but we also had finished paying for expensive childcare and our income is less risky as we are both on high salaries rather than a 66:33 or 75:25 split which would be a problem if one of us couldn't work. I also wouldn't have done it pre-children but am more confident now we made the right decision and seeing them happy here is worth it.

gunnersgold · 09/10/2021 07:57

That is a huge mortgage !! Just because they will lend you that doesn't mean you should take it ! If interest rates go up you have nothing to buffer you ! If you are huge risk takers then crack on but if not I imagine you'll have a lot of sleepless nights !
In contrast my dh earns more than you together and the most we ever borrowed was 250k . We have a very lovely house . I'd consider moving area and jobs before taking that on .

Asdf12345 · 09/10/2021 08:01

Sounds alright to be assuming a clear plan for the coming years with very likely increasing income and no major changes in outgoings. If both your careers are likely to progress well and no plans for children in the next ten years I’d go for it.

ChiefInspectorParker · 09/10/2021 08:09

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MrsKDB · 09/10/2021 08:12

What if interest rates go up? Do the figures on interest at 4-6-8%.

MasterGland · 09/10/2021 08:14

Yes. You should not borrow more than 3.5x joint salary, really. A fancy house just isn't worth the stress of financial worries.

JoborPlay · 09/10/2021 08:17

Nope. Housing shouldn't be more than 25% of your take home if it's to be comfortable.

Cosmos123 · 09/10/2021 08:24

@JoborPlay

Nope. Housing shouldn't be more than 25% of your take home if it's to be comfortable.
With rising house prices and rent that is not at all possible for many people.
JoborPlay · 09/10/2021 08:26

Cosmos123 but it's possible for the OP. And for those it's not possible for, it won't be comfortable.

Hopepark · 09/10/2021 08:28

@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?
Considering taking out a mortgage of £525k with £200k deposit to buy a house in an excellent location (desirable town, catchment desirable state school - likely a good bet in terms of holding/rising value), on the basis that in a couple of years we are likely to have a lump sump to pay off £200k of the mortgage. But it is an extended term mortgage to achieve this, which makes the monthly repayments the same as our rental costs now. Would be a fixed term for 2 years which seems a bit short given predicted interest rate hikes. We are 43 and 48 yrs old and have had our children who are both school age. Reading how little people have left on their mortgages on another recent thread has made me doubt ourselves!
Hopepark · 09/10/2021 08:31

We are SE. combined income c.£150k.

manywildhorses · 09/10/2021 08:32

Yes, you’re stretching yourselves. Our household income is higher and our mortgage is half of your proposed one. We have a fantastic lifestyle. I wouldn’t want to be worrying about the mortgage every month and not have enough savings or disposable income.

StrongerOrWeaker · 09/10/2021 08:37

You're are already stressing about it now....are you prepared to feel like this for years to come?

Bluntness100 · 09/10/2021 08:40

Are your salaries expected to increase op? If so then it’s possibly a surer bet depending on escalation time line. If not I’d think again to be honest, you’ll be skint forever.

Shadowboy · 09/10/2021 08:43

Our joint salary is £100,000 and we could only borrow £400,000 so really shocked to see you can borrow £675,000

milkshakeandchips5 · 09/10/2021 08:46

We have a combined income of slightly higher than you and have just purchased at £725k with a deposit of £115k. We also have childcare costs starting next year.

It's a stretch and I can understand why others find it too risky. That being said, we spent over a year looking at smaller / cheaper properties and found in the area we are in we would need to move again within 5-7 years. Given the cost and stress of moving, we decided to stretch now at a point our salaries were likely to rise. We've bought a house we can do a lot to over time and that we will likely stay in for +10 years.

It'll be tough for 2/3 years but I'm confident it's the right thing in the long run.

pilates · 09/10/2021 08:46

I feel you have gone around this the wrong way. You approach a lender see how much they will lend you and then look for properties. I’m surprised the estate agent didn’t ask for proof of funding/mortgage AIP before putting your offer forward. But in answer to your question yes I feel you are over-stretching .

Loudestcat14 · 09/10/2021 08:49

My maths is a bit rubbish, but it seems you could be looking at roughly 40-45% of your monthly take home pay going on your mortgage, which is a very high %. What happens if one of you loses your job? Would you be able to cover it on one salary if you had to?

Personally I wouldn't take the risk and would look for somewhere far cheaper. Or are you in London, where £860k isn't that shocking for a house?

Scrollonthroughtherain · 09/10/2021 08:52

When the bank stress tests you when considering whether to lend you the money, it's unlikely they'll lend it to you if you can only just afford it now. As far as i recall it's part of the laws around them being responsible lenders. Mind boggling that you can't find something suitable for less than 860k.

Imo you should work out what you can comfortably borrow before you start viewing properties outside your price range, much less make offers.

RussianSpy101 · 09/10/2021 08:53

No way. Our income is similar to yours and I wouldn’t do it.
Do you already have children? Are your jobs secure?

Kite22 · 09/10/2021 08:59

Nope. Housing shouldn't be more than 25% of your take home if it's to be comfortable.

Well, that's not entirely true.
If Person a takes home £20K pa and housing costs are 25%, they have £15Kpa to live on, for everything else
If person b) has a net family income of £200k pa, they have £150K to live on.
So if person b) went up to even 50% of net income, they'd still have £100K to live on, which ought to be able to absorb higher running costs.

I've used big figures but the principle is the same.

Plus, if living in rented accommodation, you are often paying out a lot more. My friend just moved into their first home last month and their mortgage is half the rent they have been paying for last two years, so they can ignore the % and know they can afford the new payment.