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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:

JoborPlay · 09/10/2021 16:05

@Cruiser11

JoborPlay I pay £180 per month for an interest only mortgage and I live in a 700k house. It would cost about £2500 per month to rent my house.

How will you pay the capital?

We pay £1500 per month for our house, rent would be about £1100. Our last house, mortgage was £750, rent would have been £675.

NCForthisxox · 09/10/2021 16:10

It's bonkers our household income is 135k and we are worrying about moving to a 500k house with 100k deposit because of the possible rate increases have a think.

Evecob · 09/10/2021 16:31

Our household income and borrowing are on a smaller scale but we borrowed 4.5x our salaries on a property a few months ago and got a 5 year fixed.

We absolutely love the house, we are happy with our choice. It is worth it for a good location and lifestyle - its somewhere you spend most of your time especially since covid, and you have the option of selling if interest rates ever do rise stupidly in 5 yrs.

If it wasnt for nursery and preschool expenses we would have plenty of money to spend after all bills, fuel, food etc as play money. Even with childcare expenses we can still spend money but we do have to limit ourselves to a set budget, which is still realistic, and its worth it.

ChequerBoard · 09/10/2021 16:49

@Cruiser11

We’re moving in 5 years, we won’t need a large family house in the South East. Our house is worth just over 700k and we have an interest only mortgage for 144k so have plenty of equity to buy either a smaller house or a similar size house in a cheaper area.

Then you only have a £144k mortgage which is minute compared to what the OP suggested taking on!

blacklilypad · 09/10/2021 16:53

I'm surprised that you can borrow 5.5x income as it is usually 5x max with most people currently getting more like 4.8x

That being said if you can get it, then fine. I personally don't think it is crazy to borrow that much depending on your situation. You have managed to save a very heft deposit for first time buyers so you are clearly 'savers'. No one here can say if you are stretching yourselves too much as we can't see your finances. Spend some time on excel and work out your buffer. If you can only just afford repayments, bills, food, holiday, gifts, etc. now then you are overstretching. If you have room (ie you can still save) then possibly not.

We have borrowed more than that (repayments are around £2700) and although we are a bit stretched we certainly have wiggle room for if interest rates go up. We also 'stress tested' our mortgage payments by overpaying our mortgage by what we expected our new mortgage to be (£3000) for a couple of years (it was meant to be a year but took a long time to find somewhere).

Cruiser11 · 09/10/2021 17:09

ChequerBoard I replied to another poster who said they didn’t know anyone whose mortgage was less than rent.

RandomMess · 09/10/2021 17:24

What about the council tax, water bills, gas & electric - all those bills are steadily rising too :( are these things going to be more expensive at the property you've offered on? Are you planning to have children/more children?

catsjammies · 09/10/2021 17:32

Single household income of £115k, deposit of £200k (with keeping £70k back in case of emergencies), we are looking at an absolute maximum of £700k properties. I am much more comfortable with the idea of £600-£650 though for the reasons you mentioned.

Of course that's on a single income so we are more exposed than you.

I think you're mad and I wouldn't risk it.

We kept looking at 'dream' properties of £800k but they still seemed like they weren't absolutely perfect. Now we're looking at something liveable for £600ish and we can overpay like buggery and extended it into the perfect house for us.

Embracelife · 09/10/2021 18:44

@Cruiser11

But your mortgage is "only" 144k.

( is the rather from increase in clue?)

Op is going to have a 600k mortgage

Embracelife · 09/10/2021 18:44

Is the equity due to increase in value?

Embracelife · 09/10/2021 18:46

Ops situation is
combined salary of £120k, have a deposit of around 185k and would therefore need to borrow 675k to buy the house for £860k

Interest only on 675k is sill substantial

Cruiser11 · 09/10/2021 18:49

Embracelife the equity is due to increase in value and paying off two other mortgages we had on the property.

CellophaneFlower · 09/10/2021 18:50

@NautaOcts

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.

£240 per month house insurance? Really? Do you live in Buckingham Palace?

JoborPlay · 09/10/2021 18:53

@Cruiser11

ChequerBoard I replied to another poster who said they didn’t know anyone whose mortgage was less than rent.

I said my mortgage has never been less than rent

Nanananani · 09/10/2021 18:59

Depends on age, projection for salaries, kids? Adding childcare to that would be financially crippling.

Have you considered the expenses of owning a bigger house? Insurances etc?

My honest answer is I wouldn’t do it. But our situations could be very different. (Our income is more than twice as much and I wouldn’t take that mortgage on)

RJnomore1 · 09/10/2021 20:25

Ah @Onandoff I thought I’d missed out on something!

BlueMongoose · 09/10/2021 20:35

The old borrowing rules back in the day were max of 3x the larger income + 1x the smaller. That seems sensible, provided there is anything at all available in that range. I appreciate that in some areas on some incomes people just have to stretch further, but as a FTB with a large deposit, is there really nothing decent where you're buying that's cheaper than 860K?
Interest rates are at historic lows, and have been for some time. I recall times back in the 1970s-90s when they were 12%, 15% an even 17%. I doubt any government would let them get so high again, but when they are this low, a rise of a few percent could see repayments doubling. In the current highly volatile economic climate, with the strong possibility of an increase in inflation, or even us ending up with stagflation, I'd be cautious right now.

stinkystinky · 09/10/2021 20:44

Also not just the mortgage. A house that much is going to be big I assume? Decorating? New heating (our boiler failed within 6 months of buying our place), general upkeep, etc etc. Cost heat it. Council tax etc. Houses are money pits!

BlueMongoose · 09/10/2021 20:46

@Embracelife

Worst case scenario Op has to sell in 5 years. And has at least the 185 they put into it. Plus whatever is paid.

So long as op goes in with open eyes about the real monthly costs mortgage and bills . Ans Maintenance. And decor and Furniture.

Versus lifestyle on remaining net income.

Plus Potential childcare costs.?

Has v Good life or illness insurance .
Then it s a choice .

Govt encourages taking on debt against property. Not much difference from the 40% govt loan on help to buy in London.
There will be a ton of people who won't be able to afford the interest on that 40% five years after buying and will have to sell.

If op has to sell up in 5 years
So be it.

Hmn. And if the housing boom collapses, due to the stamp duty holiday bubble bursting and/or people being unable to pay mortgages at increased interest rates as you mention, and at the end of the 5 years they are in negative equity? Admittedly they would be unlikely to fall so low given their large deposit, but if history repeats itself, with falls of 15% or more (more in some areas/price bands), they could at least lose most of their original deposit- and what then?

Original poster

Belinda2000 · 09/10/2021 21:09

Reading everyones comments here makes me want to pull out :(
Our idea was to go for a 30 year mortgage, in which case our monthly repayments would be just above £2400 per month (insurance, bills, council tax etc would all come on top). We are not too concerned about this amount as we don't have an expensive lifestyle at all but it is true that it would leave us with very little wiggle room in case of illness, redundancy etc. We have 1 child and are planning to have another one in the not distant future so childcare cost will increase too...

OP posts:

blacklilypad · 09/10/2021 21:17

@Belinda2000

Reading everyones comments here makes me want to pull out :( Our idea was to go for a 30 year mortgage, in which case our monthly repayments would be just above £2400 per month (insurance, bills, council tax etc would all come on top). We are not too concerned about this amount as we don't have an expensive lifestyle at all but it is true that it would leave us with very little wiggle room in case of illness, redundancy etc. We have 1 child and are planning to have another one in the not distant future so childcare cost will increase too...

Please don't make such a massive decision based on random people on the internet. Only you and your DH know what is feasible for you. Spend some time really working out your finances and have a frank discussion.

You can't do much to protect from redundancy but are your industries ones where you think getting a new job would be easy? Or is it tough? Also how likely is a redundancy right now? Is your industry pretty stable? That's a big factor.

You can get insurance for critical illness cover. We have one that kicks in after 3 months so isn't that expensive but if something terrible happens, we don't have to worry about the mortgage.

ayegazumba · 09/10/2021 21:27

I am in exactly the same position as you. Same joint salary, slightly higher deposit amount but not much and looking at buying at around £850k. Also have 1 child and looking to have a 2nd in the next year or 2. We mainly focussed on the monthly payments which are more than doable but the responses here are making me wonder if I'm looking at it all wrong. For the pp who said 'you don't need bi-folds to be happy' a standard 3 bed semi where I live is about £800k. I just want to be comfortable and have a bit of space. Currently in a terrace and it's starting to feel cramped already with just one DD. anticipating our salaries will both increase over the years and at some point (not that I'm
Hoping it's anytime soon) they'd be inheritance injections for both of us. Surely as long as we can more than comfortably afford the repayments we can afford the house??

Embracelife · 09/10/2021 21:30

What are you buying?
A terrace in London zone 2 or 3?
Or a big house outside?

honkytonkheroe · 09/10/2021 21:33

I wouldn't sleep at night!

HarrisMcCoo · 09/10/2021 21:36

When we did have a mortgage years ago, we based it solely on one income so that we had enough disposable income if the shit hits the fan. Lots of crap stuff does happen in life. Need several rainy day funds.

You are leaving yourself wide open there, with a huge mortgage.

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