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.

Whilst I dont have anything like the sums you are discussing, we were in a situation where we were just about 4 years off paying off the mortgage and decided to get a new big for us morgage and upsize at aged 40. Its 4 times our joint income.
I dont know if its worth it yet. One one level i love some of the thing we traded up for like a drive, a garden and being detached but on another level I am often worried about one of us losing our jobs or getting ill and realise we spend a lot of money each month on the things we wanted. But then we hope we will get some of that back when we sell.
So I suppose look at the difference in cost each month for 25 years and work out what the benefit is and is it worth it too you.

Personally no.

It depends a bit on the part of the country you are in and how stable the property markets has been there, for say the last 3 to 4 decades though.

What’s the biggest percentage drop the market has ever seen there since 1980? I’d up increase that percentage by 20-25% of itself in case of black swan events and if that final percentage would wipe out your deposit I’d be wary. Unless your jobs are absolutely cast iron and/or you have something like 200k or two year’s outgoings in savings.

We have family income of circa £250k pa. We have c£300k in equity and £300k mortgaged. That’s a bit high for me, but as a child I went through house repossession and homeless after the 1980s oil price slump in Aberdeen when house prices fell 10% a year for three or four years.

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.

You’re missing the bit about being a slave to the repayments and interest though. It isn’t really the best house you can ‘afford’ if you’re borrowing £800k. What happens if interest rates rise?

DH and I have a similar joint income to OP. When we were offered a massive mortgage, we realised most of our income would be ploughed into repayments every month for years and years. We would have paid so much in interest over the years. It’s such a waste of money and it ties us into work at the pace we’re currently working for decades more.

We could actually ‘afford’ the house we bought because we have now actually own it outright. We could downsize and release the equity or we could buy a more expensive house by using the money we save every month not paying into a huge mortgage.

OP asked for opinions and I’m explaining how we did things differently to offer an alternative perspective.

Money is one of the biggest causes of stress in most peoples lives and not taking on a huge mortgage is one way of alleviating that stress.

You’re missing the bit about being a slave to the repayments and interest though. It isn’t really the best house you can ‘afford’ if you’re borrowing £800k. What happens if interest rates rise?

The OP can fix though & will still have an awful lot of money left each month.

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.

Yes I find it not very representative plus they are often high earners which again is unusual as higher incomes tend to relate to higher prices. Most people I know have no option but to borrow 4 or 5 times simply because of house prices.

@Goatinthegarden

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.

You’re missing the bit about being a slave to the repayments and interest though. It isn’t really the best house you can ‘afford’ if you’re borrowing £800k. What happens if interest rates rise?

DH and I have a similar joint income to OP. When we were offered a massive mortgage, we realised most of our income would be ploughed into repayments every month for years and years. We would have paid so much in interest over the years. It’s such a waste of money and it ties us into work at the pace we’re currently working for decades more.

We could actually ‘afford’ the house we bought because we have now actually own it outright. We could downsize and release the equity or we could buy a more expensive house by using the money we save every month not paying into a huge mortgage.

OP asked for opinions and I’m explaining how we did things differently to offer an alternative perspective.

Money is one of the biggest causes of stress in most peoples lives and not taking on a huge mortgage is one way of alleviating that stress.

Op has a huge amount of disposable income on top of her mortgage payments. She can release some of that to cover an increase in interest payments. 10 year fixed terms are still available if she is worried about future rises. If she also overpays she’ll be on her way to clearing her mortgage early. I would class what she is proposing as low risk high benefit.

Op has a huge amount of disposable income on top of her mortgage payments. She can release some of that to cover an increase in interest payments. 10 year fixed terms are still available if she is worried about future rises. If she also overpays she’ll be on her way to clearing her mortgage early. I would class what she is proposing as low risk high benefit.

I get that it’s totally doable. OP asked ‘what would you do’ and I’m saying what I did and why. You’d do something different so that’s good. Op has a range of perspectives to think about.

SIL is currently in a large fixed term mortgage and wants to move house for various reasons. She can’t because the chain keeps collapsing and she cannot leave the chain (and say rent for a bit) under the terms of her mortgage. She didn’t anticipate this happening and whilst it isn’t catastrophic for her, it is causing no end of headaches.

If you spend big for the time you need the space ( ie kids at home) the gain you make will be bigger when you sell -ergo - better pot to live on when you are older - so I'd say it's a win win .

@gettingto

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.

Yes I find it not very representative plus they are often high earners which again is unusual as higher incomes tend to relate to higher prices. Most people I know have no option but to borrow 4 or 5 times simply because of house prices.

This is us. And to be fair, you're both right that we are odd, certainly compared to most people we know. Anyone with a comparable income has stretched themselves for the bigger house but it's not us.

We're early 30s, mortgage free, and live in a 3 bed detached that is now worth about £250k and have a combined income of circa £150k. So, no OP, I wouldn't do it because I'm risk averse and prefer having cash available for a rainy day rather than the big house. I'd stress test much higher than 3% if you do decide to go ahead.

We did very similar. Bought our first home for 900K with a 200K deposit. At the time we had a household income of around 230K. Three years later our household income has risen to about 310K. DC in private school. No stress at all. If you anticipate stable or growing income then go for it. I don't think you'll regret it.

@Goatinthegarden

Op has a huge amount of disposable income on top of her mortgage payments. She can release some of that to cover an increase in interest payments. 10 year fixed terms are still available if she is worried about future rises. If she also overpays she’ll be on her way to clearing her mortgage early. I would class what she is proposing as low risk high benefit.

I get that it’s totally doable. OP asked ‘what would you do’ and I’m saying what I did and why. You’d do something different so that’s good. Op has a range of perspectives to think about.

SIL is currently in a large fixed term mortgage and wants to move house for various reasons. She can’t because the chain keeps collapsing and she cannot leave the chain (and say rent for a bit) under the terms of her mortgage. She didn’t anticipate this happening and whilst it isn’t catastrophic for her, it is causing no end of headaches.

What’s happened to your SIL would be the case for anyone in a fixed term mortgage. I’m not sure how it applies to Op unless you’re advocating not to tie in to any product?

Have you factored in all the expenses like stamp duty (over £50k), solicitor, surveyor and moving?
We have done that - £200k deposit on a £1.25m house. My husband earned £400k and we had four kids in private (one in boarding, but overlap was only one year). We had a great house but only went abroad every other year and had two second hand cars. You make sacrifices for the things you prioritise.

Personally no.

Assuming Stamp duty doesn't come out of the 300k, You will have a 800k mortgage. You need to factor in maintenance (our is about 5k pa) Council tax and utilities.

We have a 600k mortgage fixed at 2% our income is 200k and are delighted we didn't push to 800k. Our basic outgoings at 600k mortgage are 4.1k pm Inc all bills and insurance and food excluding commute costs

Haven't read the whole thread but on a combined pre-tax of £210k you are presumably making £120-130k after tax. If you have a fairly modest lifestyle does that mean before mortgage costs you could save £70k p.a.? If so then in 3 years your mortgage will be £100-150k down (bearing in mind interest paid in the meantime), and with say 10-15% higher incomes (assuming your careers are still on an upwards trajectory) and it will sound much less stretched.

Don't forget to include stamp duty in your purchase costs BTW

I wouldn't do it because I'm risk averse and prefer having cash available for a rainy day rather than the big house.

But I don't think the OP is doing anything risky though, I'm risk adverse too. They earn 200k & with fixing & insurances plus lots of money left after their payment it's not risky.

I’m very much a don’t put all my eggs in one basket kind of person there’s no way I would have less than a year salary in an ISA in addition to the deposit you just never know what’s around the corner.

[quote ForensicAccountant]@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.[/quote]
Huh, what are you on about? I have a recent mortgage as do many of my friends (within the last 2 years), all of whom have both undergrad and postgrad loan repayments. All of whom are in good professional jobs and for whom loan repayments made basically zero impact on their affordability. My broker went through it with me and lifestyle plus loans knocked off less than 5k total off what I could borrow. I’d much rather have had the 30k extra deposit than that!! Every single private school person I know took the loans because it makes financial sense.

Most people don’t know what precisely they will earn after uni. Many people who become artists or writers needed that education to do it, even if they don’t pay off their loans. I certainly wouldn’t tell a child to go work in Tesco rather than be an artist who earns the same amount.

@itspartytime

If you spend big for the time you need the space ( ie kids at home) the gain you make will be bigger when you sell -ergo - better pot to live on when you are older - so I'd say it's a win win .

Yes exactly. All these people saying how joyful it is to be mortgage free will be pissed off in 20 years when their friends downsize, buy houses for their children and spend 3 months of the year in tbe Caribbean. A mortgage is a form of investment. If you’re pouring that money into ISAs etc then you’re doing similar, if you’re just spending it on being “relaxed” then it’s money down the drain.

@User112 Depends when you want to retire.

I’d do it OP if you have plenty of money left for a rainy day and don’t have other large commitments like private education or expensive cars (which you don’t). Go get that house!

It's difficult to comment without more information on your financial situation. A far more important issue than uni fees is how you intend to fund your retirement and that's not something you've mentioned yet. If you're in a situtation where you both have excellent existing pension provision and/or a good portfolio of investments and a plan for how they will fund your future then I would be less concerned about taking on a large mortgage.

If £300k is essentially the sum total of your assets then you'd be well advised to be putting aside significant amounts to invest for your future. Some people might be happy to plan to downsize in the future but that is putting a lot of risk on a single property. As a PP said I'd also be concerned that although £300k is a lot of money, if it is the sum total of you assets then it is on the low side for your ages and incomes (unless those incomes are relatively recent and/or there have been some financial shocks such as divorce) so I would wonder about whether you are as frugal as you think.

House prices do go down as well as up, it is not a given that they will increase to provide 3 homes and Caribbean holidays

A mortgage is a form of investment. No it isn't, although it can be a way of funding an investment.

You said that you haven't factored in private education for your youngest as there are good grammars nearby.
But what if they don't get in - would you be able to manage fees instead of (horror of horrors) resorting to a state school?!

No way.