Borrowing £1m+

[EllaSW]

Madness?????

I have a friend that is borrowing 1.1m and repayments (not interest only) are c£3500k. It all boils down to what your earnings are of course but for me, even though my job is secure, if one of us lost our jobs or went on maternity leave, that level of repayment could be hard to meet.

I'd personally feel more comfortable if the repayments could be reached with only one salary.

I’m finding this thread fascinating, amazed at the size of people’s mortgages and some interest only, but I’m older and obviously risk adverse, makes me think we didn’t make our money work hard enough 😂
Hope it all works out for you.

Given the rate at which house prices rise, if you trade up in steps you might never be able to afford “the big house”.

If we’d traded up in 2015, the houses we are looking at now were about £500k. They are now £1-1.2m and almost out of our price range. The gap between houses and our current flat is widening each year. We essentially have the option of taking on a big mortgage now, or staying in a flat forever.

That’s not really the case. The ladder has been comprehensively broken with higher house prices & the resulting increased stamp duty, particularly in the south-east. Equity is substantially wiped out by it on each move.

Stamp duty and escalating prices is why we jumped right up to the house vs adding more intermediate steps - it makes no sense in that environment to wipe out 40-60k+ each jump in lost money

Would agree with a PP that small DC make you tired and you may plateau at work for a bit - that was also my experience - but since then my trajectory has been fine, and salary has increased to make it mortgage and childcare less but I would say we bought with 60% LTV, so not quite at the 800+ range

We did wipe out our savings doing a house renovation, if that isn’t on the cards you’ll be in a much better place

You could also if in trouble do a reverse rent - either pick somewhere smaller in London or rent out the London house and rent outside of London etc there are more options than just selling up

in a very similar position OP, similar figures too. I worry about one of us getting sick as we’d depend on both salaries to pay the mortgage, and not being able to take a break from work if needed, for whatever reason. Difference for us is we’re late thirties and we’ve had kids, so we’ve gone through the period of paying for childcare etc - but on the other hand, we are closer to retirement!

I am worried about it but we love the house we’ve found so much so we are going to take the risk.

@Changechangychange @pitterpatterrain @Porridgeislife That's exactly it. Stamp duty and prices just don't make a more interim move worthwhile

@StuckInARug congratulations on finding a house that you love!! I'd go for it personally, esp if childcare costs are behind you. If you're late 30s it sounds like retirement will be a way off yet and it's so difficult to find at the moment

Covert hahahaha.

Incorrect. Modern society wanting it all now, wanting the big house but not willing to move through the ladder to increase equity.

Complete disagree, this ladder is a very outdated view. People are older & moving is so expensive that it's better to skip steps.
I'm also confused by the incorrect part, so you think most people only borrow x1 their salary?

Increasing equity by moving through ladder is eroded by stamp duty (especially LBTT in Scotland) on expensive houses and legal/moving costs.

in Scotland at £750000 purchase price LBTT is just shy of £50k alone. Makes the idea of the ladder very counterintuitive.

Also - what exactly are you imagining is the intermediate step here? We want to move from a two bedroom flat (£500k) to a 3 bedroom terraced house in the same area (£1.2m).

What is this in-between step you are imagining? Sell up and moved out of London and hope to move back in again at some point? (Not happening, given the widening house price gap - we’d never afford to move back in).

People buying £1m houses aren’t buying mansions, for the most part. They are buying normal family homes in expensive areas.

@Changechangychange Oh I completely agree. I think a so-called interim move round here would be an 800k property but that's likely to be a flat and you'd need to move on in a few years. Whereabouts are you, if you don't mind me asking?

Herne Hill/North Dulwich. Don’t want to take DS out of school as he is settled and happy (and he doesn’t cope at all well with change), which obviously limits how far out we can look.

The type of places we are looking at were selling for £900k literally last summer, and are on for £1.2m now. It is just hideous.

i am in a large flat at the moment. An intermediate step for us would be a house around £1m. Except that would cost us around £80k in stamp duty and would be in a worse location, worse condition and perhaps 30% bigger than our flat in terms of footprint. There is no viable intermediate step for us unless we wanted to move out of our area, take kids out of school, increase our commute etc!

Also consider house much a % of income per year you will need to spend for ongoing renovations.
new heating system, windows, damp issues, garden work, general upkeep, painting/ new bathroom etc etc.

Our house (1950s) we probably spend about 5% house price every year the last 5 since we owned

@Changechangychange That is hideous. It's similar around here. Do you think that prices will come down again?

We bought a similarly priced house in SW London last year. Our income is higher but we didn’t want to over extend ourselves (and may purchase a country home at some point). I think, in London, £1m+ mortgages can’t be that uncommon - you don’t get much for your £1m+ in certain areas. Our house is only 1,600 sq ft.

The other step most normal people do is, heaven forbid, move to a slightly less desirable, and less expensive, part of London.

And why exactly is that morally better, if you can afford to stay in the preferred area?

@SD25 I made no comment on the desirability of any area. Nor did any of the responses I've seen - other than yours. London is expensive wherever you are and your post is unhelpful.