Page 2 | Taking on a massive mortgage

StillProcrastinating · 31/12/2023 16:35

For me it’s about LTV and how much are you spending on interest versus repaying capital. I think I’d check the assumption whether it’s actually better to have a stepping stone house. But then I’m hugely resentful of paying interest and have always tried to minimise it!

stepping stone also gives you flexibility for schooling etc.

Malbab · 31/12/2023 16:41

It depends on LTV as pp have said and how much of that 5k goes towards the debt and how much of that as interest
do you have provisions to overpay to bring down the repayment ?

ChoseARandomUserName · 31/12/2023 16:49

It sounds hideous to me. I've worked in 4 law firms and lots of lawyers eventually have a breakdown or feel they need to leave the industry. Presumably you have great private healthcare to see you through a bad physical or mental health episode, so you're good for that anyway?
I have a take-home of £4000 a month and my half of the mortgage is £250, so I guess I'm not the person to advise!

LinnieM · 31/12/2023 16:52

I was about to comment but then I realised I’m too poor for this conversation. I’ve als never had a mortgage before so let me just mind the business that pays me!

Sunsetred · 31/12/2023 16:52

I wouldn't do it. You have no idea what will happen in the future both work and health wise. You might also need to go on maternity leave at some point in the future and have to pay crippling nursery fees. We currently pay £2.5k a month for two in nursery full time. I am also a lawyer and after having kids I've stepped away from high pressure private practice and work in house now. It's a lesser salary but you work 9-5 and there's no billing. I have more time to spend with my children and less stress when I cannot work because the kids are unwell or the nursery has closed etc.

TheWillowTrees · 31/12/2023 16:53

StillProcrastinating · 31/12/2023 16:35

For me it’s about LTV and how much are you spending on interest versus repaying capital. I think I’d check the assumption whether it’s actually better to have a stepping stone house. But then I’m hugely resentful of paying interest and have always tried to minimise it!

stepping stone also gives you flexibility for schooling etc.

Agreed. Especially if you’re disciplined, you could instead be eg paying £3k and saving/investing the difference tax free, which would fund your moving costs if necessary as well as giving you flexibility.

DrySherry · 31/12/2023 16:59

I agree it's more about LTV. If your borrowing that kind of money at 90% it's pretty scary and ill advised in a falling market. If you've built up a 40% deposit then really not so much risk involved.

BumbleNova · 31/12/2023 17:04

This really depends on an honest look at where you are and where your careers going. I presume you don't have kids yet? Keeping the wheels on in private practice without a nanny is basically impossible unless one of you takes a step back. Our nanny - not in London - was circa 4k a month plus extras. So that's 9k with bills and food.

If one of you takes a step back, that is likely to net out in the same place. No nanny cost but a haircut in terms of salary.

As others have mentioned, LTV really matters too. You need to have a plan B if it becomes unsustainable.

My mortgage is even more eye watering than yours but my kids are older and I'm on partnership track. We have circa 600k equity too so can always sell up.

Pipsquiggle · 31/12/2023 17:19

Do you have DC?

If not you need to factor childcare in this, as they are huge

caringcarer · 31/12/2023 18:01

Shinyandnew1 · 31/12/2023 14:22

That does sound a lot, but it depends on a few things really.

Like…what are your salaries? Do you or will you have kids? Will you want to go part time? Will you have to pay for full time childcare? How old are you both?

what if we suddenly hate our work?

What do you do? Is that likely? If you work for the NHS or within education, I’d say this was increasingly likely, unfortunately.

NHS, Teaching or Social Work. Notice the public sector trend.

tescocreditcard · 31/12/2023 18:08

If I was worried about suddenly hating my work there is no way I'd be taking out a mortgage that big.

In fact, I DID, have a big mortgage years ago and by coincidence, One day I suddenly hated my job. I just stayed there though until I got another one because I was worried about not being able to pay the mortgage. I guess what I'm trying to say is I've been in your position, it's not easy.

dingledells · 31/12/2023 18:09

Surely a massive mortgage is relevant to your income?!

Charlie2121 · 31/12/2023 18:11

Our pre-tax household income is around 300k and I wouldn’t dream of having a mortgage anywhere near that big.

High salaries afford you freedom in life, often later on with things such as early retirement. To create a 5k per month millstone for 30 years to me is crazy.

We bought a relatively cheap house and paid it off in 4 or 5 years. That means we now have low monthly expenses and can easily afford things such as career breaks for childcare, private school fees etc.

We plan to retire by the time our DS starts prep school. That allows us full availability to look after him during the school holidays as we have no family childcare options. We’re looking forward to showing him the world while he is still quite young and wants to spend time with us.

Would I rather miss out on this and work for many more years just to have a more expensive house? Not in a million years.

Pipsquiggle · 31/12/2023 18:13

Are you 'magic circle' lawyers?
Do you have any DC?
If you are planning on DC, you will probably need a nanny rather than just a nursery due to the hours you'll be working.

RokaandRoll · 31/12/2023 18:22

The loan to value ratio mentioned earlier is key, because no one knows what's going to happen to house prices in the next few years. If you end up owing more on your mortgage than the house is worth then you really could be in huge trouble. Especially if that's coupled with a recession. Nevermind hating your jobs, you'd be slaves to them if you could keep them. So without at least say 30% equity right off the bat then no, I wouldn't do it.

KievLoverTwo · 31/12/2023 18:34

I have to take a more moderate line here and say I think you will be fine. Our take-home on x1 @ 108k (after 3% pension) is 5.7k so yours must be at least twice that, maybe 2.5-3. I think it's sensible to start off planning not to move again any time soon. And negative equity only really matters if you have to move OR if you want to switch mortgage lender when you remortgage. I don't think most banks care if you are in negative equity, they just send you a new deal through the post. Of course, I don't know what happens if the shit hits the fan, we enter a long recession and their lending tightens up in the future. But your salaries are only likely to keep.going up, so I still don't see it being a problem.

In your position I would do two things for peace of mind. Firstly make sure that whomever you get a mortgage with does not currently have an SVR which is far higher than other lenders (could be a sign of short term deal for longer term pain) and I would secondly dig out land registry info for the five years after the 2009 crash and see what happened to the area's house prices, if they plummeted, and how long they took to recover. If you are planning DC, make sure you find an area with good schools too.

I wouldn't worry about the 30 year mortgage either. I bet you can shave ten years off that by overpaying with substantial salary increases and bonuses in the future.

RedRidingGood · 31/12/2023 18:39

How old are you OP and do you have any DC? I was in a similar position recently and almost took on a huge mortgage.
I've decided against it as I'm putting the money towards private education for my DC, and aiming for financial freedom by paying off my current (and rather low) mortgage as quickly as possible.
The house with the huge mortgage was a big house, in a decent location but I realized I didn't need such a big place. Also realized that if one of us lost our jobs the other wouldn't be able to pay the mortgage.
If you're feeling scared as mentioned in your initial post I'd say wait till you're comfortable and confident enough to move.
Life is long, so there will be other opportunities. The best way to enjoy a home is to have peace of mind so go with the option that allows for that.

Worries123 · 31/12/2023 18:41

I wouldn't.

Even if your combined take home pay is about 12k, that's still almost 42 % of your salary on mortgage.

I think a lesser mortgage payment will give you peace of mind and will make you feel more relaxed.

Sleepsleepsleep123 · 31/12/2023 18:56

blueshoes · 31/12/2023 16:29

Future earning potential looks good, but what if we suddenly hate our work?

I assume you are both City lawyers. If so, there is a good chance at least one of you will hate your work (or the unpredictable hours and demanding clients and business development) soon.

Try to make it work on 1-1.5 salaries, rather than 2 City lawyers going full tilt, is a safer bet.

In my experience, this is great advice. I left law because I ended up hating. Can't imagine ever combining motherhood with that kind of work.

Framilode · 31/12/2023 19:03

Well my daughter and her husband are city lawyers, silver circle. They took out a £2m mortgage 15 years ago and it has worked out just fine. It still makes me shiver though.

Passingthethyme · 31/12/2023 19:04

I wouldn't unless you have a buffer, circumstances can change and you don't want to overextend yourself (unless it's very short term or you have access to funds some other way), not to mention how much money you'll be paying in interest

WYorkshireRose · 31/12/2023 19:18

purpleplucker · 31/12/2023 14:23

We are both lawyers. Currently our combined pre tax is around £250k before bonuses, likely to go up every year we stay in the profession.

We have the same household income as you and wouldn't ever consider such a large mortgage. Ours is currently around £1100/month, and we overpay another £1000/month to reduce the term.

MsBump31 · 31/12/2023 19:22

So we were in a similar situ - our combined salary is just under £200k. We were going to get a £4-5k a month mortgage, but have decided to get a smaller property because:

We want three kids. With timings, we’ll have at least two kids in nursery at the same time. So £3k a month minimum, more if we get a nanny
Half of my maternity leave is basically unpaid, so need to be able to survive on one income for a bit
We want the option for me to go part time after having the babies if I want. If we tie ourselves into a 4-5k mortgage per month, we won’t have that option

So we’re going for a £3.5k a month mortgage. We have saved up quite a bit of equity though, so can get a £1m house on that. I think whether or not it’s too much depends on your future plans - if you want kids you may not end up with two incomes forever

adultsizedogbed · 31/12/2023 19:31

@Framilode

That is either completely mad or completely brave .. I put my dh salary into the calculator and it came up with a similar crazy lending max .. I literally said to him who would be mad enough to actually borrow that much 🤦‍♀️🤦‍♀️..

Glad it worked out for them . That must be a hell of a house for £2m 15 years ago!

SupermarketMum · 31/12/2023 19:49

We did to OP, similar circumstances. We wanted to live in London and we wanted a comfortable home. Our mortgage is huge but we can pay for it and still afford nice holidays etc - in the beginning I worried about it but ultimately we decided we didn’t want to spend our lives in a cramped terraced home, and didn’t want to move to zone 4 or 5.

luckily we love our jobs and do not want to retire early 😆