Mortgage

[Anon1231990]

I would like people's views on my circumstances.

A little background, 40 almost 41, single (just split with partner of 12yrs), no children, live in his property, so need to leave, currently earning 98k but received job offer of 130k.

I have a 55 - 65k deposit and looking to purchase home (long term)

What is your opinion be of taking out a 295k mortgage, so 350k purchase price, with repayment 1650 per month. (Rental in the area would be 1k to 1. 2k per week but very little available)

Take home salary would be 5400, after normal tax, NI, salary sacrifice pension contribution, and tax for BIK on company car.

I come from a very poor background and don't have any family that would be able to help me out in a crisis.

I am completely on my own and the thought of such a big monthly commitment worries me but to get a fairly basic property in an area near the new job that's the going rate. I am going to try and keep it nearer to 320k but depends on the market and it won't significantly change the monthly repayments

It may be relevant that my current jib and offer include critical illness cover, 50% salary until pension age and death in service benefit of x4 salary.

Thoughts would be much appreciated. I am very risk averse and so looking for any opinion on what you would do in the above circumstances 🙏

That sounds fine to me. The mortgage repayments feel like big numbers but that's well within what you can afford with that take-home. Ask for the repayment Direct debit to be set to a bit more than the actual repayment. You can live a perfectly decent standarr of living and be putting £2k or £2.5k into the mortgage each month no sweat. But don't let that tempt you to borrow more - it's more sensible to overpay and be paid off sooner.

Sounds fine to me too. It’s about 25% of your take home salary which is absolutely fine.

I think that's fine to be honest as a % of take home pay. Assuming you have no other major commitments and the house you buy doesn't need loads of work.

You will still have over 3k per month left over which seems totally possible to cover costs, have a good standard of living and save as well.

You should try to put £500 or so in accessible savings as an emergency fund until you have three months salary as a buffer.

Well you definitely can’t afford £1,000 per week in rent.

It sounds sensible enough, but do consider redundancy insurance for the first year or so while you get some savings back in place after most likely depleting them fully with the move.

Wow I’d like to know what your job is paying that wage !

very doable

@OlizraWiteomQua thanks so much, the numbers really do seem huge! I will take the advice to increase the direct debit and also plan to put 1 - 1.5k a month into savings so on an annual basis I can do a bigger overpayment depending on the circumstances. I definitely won't be tempted to lend more, it feels at the very top, actually over, my comfort zone hence the post 🙈

@Saschka Thank you! Logically, I think I know this, but it feels overwhelming 😊

@AirportAssassin thank you, I don't have any other commitments, it will just be the normal day to day house / living costs. I think my fear is losing my job, the market has declined, I'm in negative equity etc.... It is a big bill to try and cover.
I am planning on saving as much as possible and annually making a decision how much to keep in savings and how much to overpay the mortgage.. The idea being to reduce the mortgage as much as possible in the 5yr fix and pray interest rates are slightly lower at that point 🙏

@HongKongGarden apologies that was a typo, rental is 1 - 1.2k per month :)
thanks, redundancy insurance is definitely on my list, I have some now but would need to increase the cover. You are correct the purchase would wipe out my savings, which doesn't help with the anxiety

@Windmill34@Windmill34 I work in corporate strategy, I have managed to get some good progression over the last 3 years so the big salary is fairly recent development. One positive is I have been putting a lot of my increased salary into savings / pension and haven't succumbed too much to lifestyle creep

Thanks all for the replies 🙏

You certainly sound like you will be able to afford it. My only suggestion is to wait to buy until you are at least 6 months into the new job especially if there is a probationary period. Make sure you enjoy the job and definitely want to stay there a while. You don’t want to feel trapped in a job you dislike because you have a big mortgage to pay.

We have a combined income of 5400 and no way would I want a mortgage that size each month but I guess needs must if that's what they cost.

I'm a single parent and earn similar OP. I overpay my mortgage each month by £800 so £2000 pcm and it's absolutely fine

My advice would be to be cautious about overpaying, the property market is falling in the vast majority of areas. Whatever you buy use previously sold data to work out what a property would have sold for in 2019 and aim for that. I don’t think the property market will ‘crash’ but I do think we’ll see most of that post covid boom erased from values over the next 2 years.

I think Hollyhead is right about the market in the near future. I would seriously consider rental for a short period of 1 to 2 years. You will earn good interest on your deposit and have the capacity to further increase the deposit rapidly from your new wage. It's likley that your position to buy would be so much better after a year or two of saving hard and waiting for the market to adjust downward.
Having said that your numbers for buying are also fine if that's what you decide. Twiglets suggestion of spending some time in the new job before committing to a purchase is also a valid consideration.

Now is not the right time to purchase a long term home.

Purchase the smallest/cheapest property (studio/flat) available for <100K if possible. Get your life straight as you want it - job ,etc. Save like mad for your long term home to purchase in 2/3 years time when your deposit will have increased and your target home reduce in price.

Remember that even if house prices stayed flat - then they are still reducing c.6% pa as a result of inflation.

I personally wouldn’t bother with redundancy insurance. They always try and get out of it. I would get a two or three bed if you can afford it and then that’s your insurance - you can rent a couple of rooms out if the worst comes to the worst.