Borrowing

[EllaSW]

My partner and I are looking to borrow 800-900k for our next house move. We're lucky in that we earn well in our 30s (200-300k p/a between us) BUT the amounts we'd need to borrow for the next move in London still make me feel sick! I'm curious - is it normal to feel that way? Or is that a crazy amount to borrow? We'd not be maxing out, lenders would lend us much more, which seems mad to me.

Bump.

We are doing it. Earn well but less than you 🤷‍♀️. I kind of think it’s not about what’s going out it’s about what’s left. Then stress test to 10%, factor in anything you might want in the future (school fees etc) and if it still seems doable probably ok 🤷‍♀️

Thanks, @Zooforhouse. My thinking is the same as yours (when I'm not freaking out 🤦🏼‍♀️). But then I think sod it - worst case you sell the house (and hopefully there won't have been a crash...). What do you mean by stress test to 10%?

See if you can afford repayments still if the interest rate rose to 10%. The bank do this for you too I think….

We felt the same way when we had a mortgage of £475k 10 years ago - seems small now!
We had an insurance house, one we could afford to buy in the event that we couldn't work and needed to sell, it would allow us to continue living close to the kid's school - having the prospect of this much smaller house on the horizon if things went wrong settled my head.

@Orangecushionsleep do you mean you owned a second, smaller house? Or that you'd planned a budget for a smaller house in the event of mishap. I'm curious as the size of my mortgage sometimes gives me the cold sweats too. 😂

Yes, banks will lend very high if your earnings are high.
They are securing the mortgage against the house, so if the house is worth the value and you can afford to repay, along with your other expenses it is ok.

Just asses what you want and any future expenses that might come along. Then buy what you like and get a good feeling in.

btw what jobs or business do you and your partner do?
I need to reassess my own career as we earn much much less.

I mean - one of my friends had a terraced house, it was well balanced, good living space, small garden...perfectly adequate and if we'd sold our house we could buy it with cash and that gave me some comfort. In the latter years when my kids had only a year to go at school, I thought we'd just rent and then buy something much cheaper elsewhere - these were options I could live with. Which was all needed because then we started running our own business and paying the mortgage was definitely a big worry in the first year or so. Options give me comfort - if I can live with worst-case scenario, I can stop thinking about it.

I can totally relate to this thread! We have a similar household income, looking at a mortgage in the ~£750k region and are now in a best-and-final scenario where we're planning to go £100k+ over the 'offers over' price because that's what the house is worth to us - argh! As it's going to be our 25+ year home and a cool project (we hope!) we're not too worried about making a short-term return and will put in extra cash if there's a difference in valuation. We're going to keep and let out our London property so I try to reassure myself that if it all goes wrong we'd still have a fall-back option, but gosh - it's still a real mixed bag of emotions!

In a very very similar situation and similar income. Except we’d borrow more than you, and pretty worried about it. We’ll hopefully be able to sell our other property in 1-2 years and then repay some of the new mortgage, but we’re locking in 5 years fixed rate as we wouldn’t really be able to afford higher interest rates (until we sold our other property). We’re in London so slightly less worried about a house price crash and this is really our forever home - or at least until we’re old and want to downsize!

i think one risk is that you then get caught up in a particular lifestyle that needs a high income and it gives less
choices if you get really tired by end of 30s/early 40s ans want to get out of a high earning/high stress role.

but if you’re still early 30s I’d do it because you’ll build up a chunk of equity etc and will actually give yourself a financial buffer later on.

it is insane amounts of money. But it is what it is….

@Hamsterrific It is so reassuring to hear that others feel the same! I get that it's in the nice problem to have category but the headlines about house price crashes atm don't help!

@Lifeat40 I think you're right - thank you. Work-wise, we're both in consultancy but tbh I'm not sure I'd recommend it as a career choice! It's a good choice financially I suppose but i often have no work life balance especially now that travel is expected again. On the other hand there are much harder jobs out there so I can't complain.

Ah yeah I thought it might be consultancy type work. It is hard to sustain that long term in my opinion and have a quality life.

but like k said if you buy well and pay a chunk down off the mortgage you will have used the financial benefits from it well.

@Orangecushionsleep That's a really sensible way to look at it. I've just been in a blind panic really which is less helpful 🤣

@StuckInARug I reckon go for it if it's a forever home. Plenty of time to work it out and you have another place to sell if needed.

@Movingonup22 We're mid thirties so not sure where that places us! Completely agree and that's something I worry about often. Suppose you can't futureproof everything though and worst case you can sell. I'd say "downsize" but it's not like the London houses we're looking at are even large 🤣

@Orangecushionsleep thanks, I had never thought about it like that, that's really helpful. We're lucky enough to live in a very expensive part of quite an affordable city so equally could quite comfortably downsize.

Thanks for replying.
In terms of consultancy, I understand the work life balance. However I hope it has been good for you and given you more opportunities.

Also be that highly paid, are you self employed like a contractor or an employee.

@Lifeat40 thanks, it has, although I don't plan to stay in it for a great deal longer. I'm an employee. I hear that the financial opportunity for contractors is pretty good though!