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Original poster

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

168 replies

User112 · 26/12/2021 22:40

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.

OP posts:
ForensicAccountant · 27/12/2021 12:32

The £5k can make the difference between you getting the house or someone else buying it.
It is not risk averse to not want to have a big mortgage commitment. If you think property investments will work for you, there are various ways to invest in property without putting your home at risk. Your home should not be looked at as an investment. Personally, I would not pay thousands in tax to downsize and therefore I will only really downsize if there are no other options left.

Flowers500 · 27/12/2021 13:04

@ForensicAccountant

The £5k can make the difference between you getting the house or someone else buying it. It is not risk averse to not want to have a big mortgage commitment. If you think property investments will work for you, there are various ways to invest in property without putting your home at risk. Your home should not be looked at as an investment. Personally, I would not pay thousands in tax to downsize and therefore I will only really downsize if there are no other options left.
…yes the 5k is good, but the point you’ve clealry missed is that it’s 5k extra borrowing OR 30k extra deposit. 30k extra deposit is worth MORE than 5k extra borrowing when you’re buying a house. Do you understand? It is massively counterproductive to spend 30k making yourself able to borrow 5k more!! Most young people buying higher value houses have student loans, it’s not an impediment to buying. The problem is saving up a big enough deposit and having a substantial salary that the banks think is safe.

Why should your home not be looked at as an investment? It has a dual purpose—an investment that holds value over time, plus you get to enjoy it during your life. I could live in a 300k house and have. 300k in property investment, or I could do the same thing but actually ENJOY the 600k house at the same time. For the majority of the population a home IS an investment. You need a bigger home when you have a larger family at home, then can downsize later and unlock the equity.

AndrewPeacock · 27/12/2021 13:23

@gettingto

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.

True. Maybe risk averse is a bad way of putting it. For me it would depend on what the disposable income looks like after factoring in the large mortgage payment. Can you still save every month? Go on holidays/days out? Do you need to budget more and keep an eye on spending? Will you have to work full time up to retirement age to pay the mortgage? The answers to those types of questions are, for me, what would make the decision.
FurierTransform · 27/12/2021 14:19

I'd only go for it I'd the house is really something very special. If it's just another rung of house in an expensive area of identical houses (think large Victorian terraces) I wouldn't.

ForensicAccountant · 27/12/2021 14:40

Don’t agree on the either/or. Parents who can fund their kids with £30-50k each will in most cases be able to put up a house deposit as well. If the £30k is all they have, then they shouldn’t really use that to fund their kids’ education.

dalrympy · 27/12/2021 14:45

Yes I would. These are the ages where your children and you will appreciate the size of the house most.

No reason to assume you can't then downsize in 15 years and be mortgage free.

My mortgage to income is much higher.

newmummycwharf1 · 27/12/2021 14:57

ForensicAccountant precisely!

Cherryonthetop2019 · 27/12/2021 15:17

No I wouldn’t. We earn very well and had a sizeable deposit but still only took a tiny fraction of what we could borrow. House is now worth just under a million and we owe £300k. We have an 18 year old about go to uni and the loan for living costs won’t cover rent never mind anything else! I wound rather be able to subsidise her and save her a lifetime of debt and still have a lovely house but not leveraged to the eye balls to do it.

Soontobe60 · 27/12/2021 15:34

An £800k mortgage over 20 years will cost you approx £3600 a month but you may actually struggle if the total house price is £1.1m, as the LTV is too low. Borrowing £700k for a £1m house is much more doable, and will cost iro of £3300 pm for a 3 year fixed rate. So on your joint £200,000 annual income, it’s more than affordable.
For a £1.1m property, I’d only offer around £900k anyway.

Nat6999 · 27/12/2021 16:41

Just remember an industry that pays £100k can just as easily collapse as one that pays £10k, what will you do if one of you loses their job? Better to only have a mortgage that one job can afford to cover.

wallypopz · 27/12/2021 16:54

Better to only have a mortgage that one job can afford to cover.

They do

BackBackBack · 27/12/2021 16:54

OP only you know the ins and outs of your financial situation. What I would say is that stress testing to 3% is very optimistic. I'd recommend looking at 6-8%. Then on top of that, could you manage if one of you had a career set back, or was taken ill long term?

wallypopz · 27/12/2021 16:57

True. Maybe risk averse is a bad way of putting it. For me it would depend on what the disposable income looks like after factoring in the large mortgage payment. Can you still save every month? Go on holidays/days out? Do you need to budget more and keep an eye on spending? Will you have to work full time up to retirement age to pay the mortgage? The answers to those types of questions are, for me, what would make the decision.

I agree & the repayments are about 30% of the total monthly income which is pretty standard imo plus 30% of 11k is a lot more comfortable than 30% of 4k

Original poster
User112 · 27/12/2021 18:37

Offer £900k !! Are you serious???

I need to start another thread on offers!

OP posts:
Flowers500 · 27/12/2021 18:40

@User112

Offer £900k !! Are you serious???

I need to start another thread on offers!

I laughed at that comment a little, people can’t give any useful advice on what to offer without way more info. For all we know it could go for anywhere from 800k to 1.5!!!
Starseeking · 27/12/2021 18:46

During the stamp duty frenzy there was a gorgeous house near me on for £1.2m which I thought would go for way over. Looking at Land Registry, it sold for £995k! The price range for peak bidding wars near me is £650-£750k.

I would most definitely start by offering somewhere around £900k, especially if houses nearby have gone for similar. The potential buying market for higher value properties is so much smaller than lower value, so people are more likely to do a deal to be able to move on.

Soontobe60 · 27/12/2021 20:13

@User112

Offer £900k !! Are you serious???

I need to start another thread on offers!

My dd bought a house that was on for £1.2m this time last year. She got it for £840,000.
Dsisproblem · 27/12/2021 20:20

@musicalfrog not sure if you are aware but parents are expected to help kids out with uni. The amount they can borrow is reduced if parents have a higher income

worriedatthemoment · 27/12/2021 20:37

@musicalfrog uni is unaffordable for
Most people
Why should only rich people go

blueflowersinthesnow · 27/12/2021 21:23

My dd bought a house that was on for £1.2m this time last year. She got it for £840,000.

Where was this? I'm dying to know the story!

itssarcasmjoan · 27/12/2021 21:25

Does it need anything doing to it.

We paid £850K, new double glazing £20k, changes the downstairs toilet to a shower room, new kitchen, new front door, summer house, new bathroom, new flooring, insulating the roof, new flat roof x2, rerenderingetc etc
House is worth over 1mil now. But if we'd have brought for a higher price we wouldn't have been able to do this things. On first look it didn't seem like it needed anything doing to it. After a year in the house we started knowing we needed to do those things.

Catcrazy83 · 27/12/2021 21:28

No way, I’d stress test to include a divorce and not stretch further than that if possible

Kiirim · 27/12/2021 21:34

I see a home as an asset that will increase in value so a good financially investment.
If you are a wise spender as you say you are then I don't see the problem. If you were however like my in laws who live for the moment, have remortgaged several times so they have a huge mortgage and very little equity then I'd be advised differently

Buy it but post us/me a link so I/we can all be pleasingly envious. Smile

Jamdown123 · 27/12/2021 22:30

I'm 40. Just bought for £950k with £250k deposit. Will be spending £150-170k on renovations which are loft extension and wrap around ground floor extension. House on the road with same layout was on right move for £1.5m, now under offer (I'm not sure at what price).

I out aside the mortgage payment every month (I don't pay down, I invest). I want to be down to £200k mortgage in 5 years when I'll need to move for high school. At the point, I will want to swap for my forever home, around £2m (today's prices). I want to work until I'm about 53. That's the plan. It won't go exactly like that, but it is the plan.

My kids will stay in state school as well, if all is ok.

I'm in London.

If it's a good investment, go for it.

Soontobe60 · 28/12/2021 00:35

@blueflowersinthesnow

My dd bought a house that was on for £1.2m this time last year. She got it for £840,000.

Where was this? I'm dying to know the story!

No story - it was over priced, had been on the market for 6 months with no offers in sight and the owner had to sell due to a divorce. My dd put in an offer of £800k, they agreed on £840k. The mortgage company confirmed the value as did the surveyor. It’s in the north west.
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