Would you buy a 1.1M house with 300k deposit?

[User112]

We are fortunate to have a 300k deposit. I run a consultancy business in a niche field and make around 100k a year. DH is on a similar salary - he gets around 10% bonus too.
I’m comfortable buying under 900k, but DH saw a property that he really likes. It’s at 1.1M.
We have 3 kids to get through uni. DS in year10 and our twins are in Y1. DH and I are 42.

Banks are willing to lend us the money, but I’m getting worried thinking about having such a big mortgage. I grew up in a working class family and we budgeted for everything. Growing up, I had food to eat, clean clothes (supermarket ones) and some toys (bought only for Xmas and birthdays) but we didn’t have luxuries. I still carry those habits and spend only on what’s needed. I feel like I’m holding back DH, but I’m really not sure! He is a spender and a risk taker.

Would you take such a big mortgage on our incomes? Mortgage will be around 3.5-4x our joint pre-tax income.

@Bluntness100

How old are you both op?

They are both 42

musicalfrog

It was probably different went you went to Uni. I’m not sure you understand the current system.

No I don't know all the ins and outs but a pp has kindly explained the basics for me.

Depends if it needs work or not. If it’s recently renovated and move-in quality (and be careful here, some look great but need quite a bit of help), then maybe I would consider it. Especially considering we paid nearly £900k for a do-er upper and so are well over the £1m mark now with renovation costs. We have similar income, but had a bigger deposit.

@User112 go and view the house and if you still love it buy it.

Your mortgage KFI (quote) will show you the stress test monthly premium the lender want you to consider.

The only other thing you need to make sure is life insurance to repay the mortgage, income protection should either of you be long term sick, family income benefit if either of you die (provides a monthly payout on top of mortgage being repaid).

Things I think worth considering are:

Have you factored in increased stamp duty over £1m, increased council tax, utility bills etc.

Do you have a savings buffer or are you ploughing everything you have into your deposit.

Could you afford it if rates go up to say 6%?

You definitely need to see the house yourself and see how you feel.

We’ve never pushed ourselves to the limit of affordability and I often wish we’d been brave enough to push ourselves a bit more.

If it’s what you really want, then stress test the payment at a much higher interest rate and give serious consideration to the running costs and general repair costs - if you’re still comfortable after that then go for it. I personally wouldn’t though, we have similar income and our house is half of what you are looking to spend. It means we have a lot of disposable income which we use to over pay the mortgage, put into savings (planning on early retirement) and holidays. I do occasionally look at more expensive houses and wonder if it would be a good investment, but I love our house and the comfort of knowing we will be mortgage free soon.

I think you also need to factor in with the house if you will decrease it's value if you don't like spending money sand don't like expensive stuff. Is it beautifully maintained currently which adds to the price? Do you think you will keep it there realistically?

I have friends who managed to devalue a house bought in the last 6 years, which seems impossible if you knew the area but they really ran it down and it was a bit overpriced to start with if you're just thinking size and location. We don't spend much on our house or garden (dh is super careful) and it's not nearly as nice as when we moved in but luckily we bought a while ago so difficult to devalue it! If you buy at the top of the market (?), then be careful with this aspect.

Yes, the only reason we didn’t do similar was we are early 50s and I wanted to pay back in 8 years so went for 600k house. With hindsight we should have got a bigger mortgage and a hose with bigger garden.

We. We have a £650k mortgage on our £1m home and have always stretched ourselves with our properties as we see it as an investment. We just have to hope that interest rates don't go sky high!

No, our household income is higher than that and we wouldn't buy a house at that value - although that depends on where you live I guess. If we lived in the SE/London, might be different.

@Flowers500

If you pay their uni fees then you’re an idiot—don’t!!! They will get a loan for that and it is ZERO advantage to not have it. If you have the 30k for each of them then give them a house deposit.

Do the maths: it makes WAY more sense to be a home owner at 25 with a student loan to pay, then no student loan and no chance of buying.

100% THIS !!! Take the loans, don’t pay the fees. Save for their house deposit instead.

Mumsnet is an odd demographic of risk adverse people who live in 100k houses and paid off a mortgage aged 30. You won’t get much sense here.

On your salaries it’s completely affordable. Just spend a bit on good insurance (life, critical illness, unemployment- if either of you in ‘at risk’ jobs). Fix rates as long as you can while they’re historically low. Overpay as much as you can to bring the term down. Property is still a great investment.

@Flowers500 please don’t tell people on here student loans will not affect their affordability. I see on a day to day basis how it does. If you don’t work or you never earn enough to pay off your loan, you should really think carefully whether a university education is of use to you. If your earnings are too low to make student loan repayments, your income is unlikely to fund a mortgage (not anywhere you probably want to live anyway).
Parents who fund their kids’ university education will most likely have other arrangements in place to help their kids onto the property ladder.

@newmummycwharf1

My parents paid for my uni and also contributed to my first house deposit at 25. It does not have to be either or if you are a high earner and I have always been grateful not to have deductions- however small - from my pay. Ultimately as parents, the idea is to make progress easier for the next generation where it is within your power, so I applaud your goal to pay uni costs for your kids. It is definetely important to stress test and ideally fix for at least 5 years. Sounds like you are both young enough and aspirational enough to out earn what seems large right now with good winds. I am sure you do this but investing your disposable after mortgage payments and other expenses may also help with uni costs and early life set-up for your kids

You went to private school and uni, and then became a SAHM? What a waste.

Absolutely. We bought a £920k house with a £345k deposit. We are now considering £1,400,000 to £1,500,000 houses with a £700k deposit. For us, it’s a combination of having a lovely home to live in and equity building. One day, when our kids are grown up, we’ll move further away from London and still be able to buy a lovely home for cash.

I’d stress test more as well.

We recently moved. Together we earn more than £100k and we mortgaged at less than you’re taking about.
Because it’s a bigger house, things like rates, utilities, insurance etc are also more.

Not long after moving my tenant in another flat stopped paying rent. I had to cover the other properly expenses for 9 months til I could get Him out. I also changed jobs, Got pregnant at same time, so now looking at unpaid Mat leave next year, which will only be doable as I’m selling the bastard flat. I Haven’t been able to save anything since we moved.

We expect pay increases but also some lump sum income in the next few years which we’ll use to pay down mortgage ASAP

There’s always unexpected rainy days. Think of worst case scenario and plan from there.
If you don’t feel comfortable with how geared it is, you don’t feel comfortable - and you should listen to your gut IMO. Your husband should also respect that.

What’s the house like? New, old? Will it need repairs? Work done?
Our house is brand new, which made me a bit more comfortable spending on it knowing it was under warranty etc for a while at least.

Mumsnet is an odd demographic of risk adverse people who live in 100k houses and paid off a mortgage aged 30. You won’t get much sense here.

Why is it nonsensical to be risk adverse? DH and I were offered a mortgage of over £1mil 6 years ago. We were initially seduced by the idea and then realised we’d have to cut back on everything, watch our finances carefully and be slaves to that mortgage for decades.

Instead, we bought a £360k 1930s semi (3 bed, 1 bath) in a nice area with a huge garden. We spent about £200k renovating it to our exact desires. It’s now a 4 bed with 2 bathrooms and a large kitchen extension. It’s worth more than we have invested in it and we have no debt and no mortgage. I love my house.

I’m 35 and we have lots of disposable income due to no mortgage. I have no stress about what might happen if one of us suddenly became ill or wanted to work less. I’m also not trapped in a relationship I don’t want to be in because I couldn’t afford to escape.

I grew up in a massive house with flash cars, expensive holidays and lots of lovely things. My dad became unexpectedly seriously ill whilst still working. I was in my first year of uni. Everything was financed on future incomes and he had expected to keep earning large sums of money for another decade or so. All of our lifestyles had to change drastically overnight and the huge family home went. It was an interesting lesson - just because you can take out a massive mortgage doesn’t necessarily mean it’s a good idea.

Mumsnet is an odd demographic of risk adverse people who live in 100k houses and paid off a mortgage aged 30. You won’t get much sense here.

I've thought this too, the advice on here is often incredibly cautious.

I would stress test for much higher interest rates than 3%. For your own peace of mind. While I don’t expect them to go so high as the teens in the 80’s, 3% is still very low.

Advice should be cautious, it should not be “go for it and to hell with the cost”. The possibility of illness, redundancy or a load of other disasters may happen, if you have the cash you don’t “have” to spend it, saving for the next generation rather than your own pleasure is a very good idea.

@Goatinthegarden

Mumsnet is an odd demographic of risk adverse people who live in 100k houses and paid off a mortgage aged 30. You won’t get much sense here.

Why is it nonsensical to be risk adverse? DH and I were offered a mortgage of over £1mil 6 years ago. We were initially seduced by the idea and then realised we’d have to cut back on everything, watch our finances carefully and be slaves to that mortgage for decades.

Instead, we bought a £360k 1930s semi (3 bed, 1 bath) in a nice area with a huge garden. We spent about £200k renovating it to our exact desires. It’s now a 4 bed with 2 bathrooms and a large kitchen extension. It’s worth more than we have invested in it and we have no debt and no mortgage. I love my house.

I’m 35 and we have lots of disposable income due to no mortgage. I have no stress about what might happen if one of us suddenly became ill or wanted to work less. I’m also not trapped in a relationship I don’t want to be in because I couldn’t afford to escape.

I grew up in a massive house with flash cars, expensive holidays and lots of lovely things. My dad became unexpectedly seriously ill whilst still working. I was in my first year of uni. Everything was financed on future incomes and he had expected to keep earning large sums of money for another decade or so. All of our lifestyles had to change drastically overnight and the huge family home went. It was an interesting lesson - just because you can take out a massive mortgage doesn’t necessarily mean it’s a good idea.

What happened to your dad is why I recommended unemployment and critical illness cover.

I believe property is one of the safest long term investments you can make. Op can downsize later in life or sell up later on to release money to set up her children. Not everyone aspires to flash cars or holidays but like to buy the best house they can afford. Op and her partner are also both high earners with lots of disposable income as a buffer, whereas your dad was the only one.

@Crazykatie

Advice should be cautious, it should not be “go for it and to hell with the cost”. The possibility of illness, redundancy or a load of other disasters may happen, if you have the cash you don’t “have” to spend it, saving for the next generation rather than your own pleasure is a very good idea.

Saving it in property is one of the safest investments you can make.

I wouldn’t. Following the same approach, we could buy a house worth £900k (using equity in current house and mortgage of 4 x combined salary). DH and I are similar age to you and we wouldn’t stretch ourselves that far. Would probably go up to £700k… House prices are really high at the moment and you want to avoid buying at the top of the market.

Also, we’re viewing the end game of paying off the mortgage; it is almost within reach…

Not a SAHM, although even if one, not a waste. Money gives you choices. Thats the whole point. OP, in your early 40s, you should still be able to take some calculated risks and you should find in 5-10 years, your investment has paid off with growing careers and hopefully some capital gain.

Do you have other savings/investments in addition to your deposit? If you "only" have the 300k deposit, i would be wary and would question if you are as frugal as you think you are (being in your 40s and on those salarys). However, if you have a bunch of other money then I'd be less concerned