Buying - how far do you stretch yourself financially???

[minko]

We have been looking in a town in Surrey (don't want to get outed!) for a house for ages. We need to move as the school situation where we live is really not good.

Anyway, my DH is the most indecisive man alive and has made offers and then changed his mind so many times I despair of us ever moving.

He has found a beautiful house he likes but it way above our comfortable budget. AND it needs work, a lot of work. He says we can afford it but I worry that he will get too stressed with the mortgage payments, on top of the extra heating, longer commute etc.

It would be a house we stayed in for the next 20 years - so how far do we stretch ourselves??

How much above your budget?

You have to think about what would happen when interest rates go out and larger outgoings on bills etc

how much work - if you are looking at structural or big jobs like re-wiring, heating etc then that is a lot of money, energy and time

We moved into a house which needed a lot of work and a fair amount is still left to be done because of the lack of money

Do a brutally realistic budget - factor in the increased Council Tax and maintenance costs. One rule of thumb is that your house costs 1% of the cost to maintain each year (routine decoration, repairs and maintenance). Any additional commuting costs.
How secure is your income / job? Are there prospects of increased income in the next few years? From either of you?
I do not think you should stretch yourselves unless you have the ability to be very flexible in the face of any crisis or loss of earnings. How much equity (as a %) would you put into the property?
How much (again be brutaly honest) needs spending on the house as a priority requirement, and as a 'nice to have in the future'?

I would think carefully about any of your circumstances which might change and whether that would have a bearing on you affording the house.

We bought our current house which was a stretch (but an affordable one) on two incomes. For various reasons, we do not want me to continue working and it means that we cannot afford our house. As it turns out, we have decided that if I am not working we want to live outside of London anyway, but I was very stressed for a while thinking that I either had to stay in my job or force us all to move from a house we love. With hindsight, I wished we had bought somewhere less expensive/taken that issue into account.

Another thing you could consider, if you can afford to, would be reduce your deposit by a little bit and keep back some "emergency" money. That might make your DH less stressed but shouldn't make a huge difference on your mortgage payments. Obviously that may not work, depending on how much you are stretching yourselves in the first place.

About 20% above our previous budget... I trust that DH knows what he's talking about with the finances - he works in the city. But I worry about the psychological effect of the money worry. Like worrying about being made redundant or sticking at his job even though he doesn't like it to keep paying for this house.

He is the kind to worry about appearances and wants the big posh house to impress people/his mother. I couldn't care less about all that, just want a nice house with decent schools.

Also think carefully about whether you can afford to do the work. It is very frustrating to live in what would be your dream house but not be able to afford to do the work it needs.

It desperately needs a new kitchen and that would involve knocking down a really badly planned utility room, moving/replacing the boiler, putting in a new window etc etc. At least £30k and that's just for starters...

Personally wouldn't. I think there is nothing more soul-destroying than being worried about being able to pay to keep the roof over your head.

minko - think about this scenario.

Financial markets crash and interest rates go up. Your DH loses his job and your mortgage costs double. On top of that your house falls in value. Have you got the cash reserves to ride that out?

If not, then no. Just rent a lovely house instead. You would be amazed how cheap it is.

We are about to stretch ourselves hugely. We have lived in our old house for over 10 years and have quite a lot of equity and a pretty insignificant mortgage (£600 per month) which we have been overpaying (about £1500). New mortgage is going to be £2700 which is seriously scaring me, but we are factoring in a lot of things...eg the end of nursery fees (£700), au pair not having to drive and so savings on insurance and petrol. Sure it will be tight, and if interest rates go up, we'll be renting out rooms and living on value porridge...but we've thought it through and done our sums. We have considered private education in the past, and that is no longer an option.

DH has a very secure job and when he leaves in 15 odd years, he will get a big pay off. My job is pretty secure and I could find another one reasonably easily....I am a bit worried this sounds a bit smug. Not meant to be - but you do need to consider all of your own circumstances before you can be happy with a decision.

Good luck!

Thanks everyone. You've given me lots to think about. We are in a similar situation to you mumof2 regarding mortgage figures.

I'm just not sure I need a big house that much though!

"I trust that DH knows what he's talking about with the finances - he works in the city." I'd want to know myself, I wouldn't rely on soemone else telling me it's ok. I don't know if that's the case here?

But it's not really if the interest rates go up, it's most definitely when and that could be rather soon. Sadly.

I get the impression that you don't particularly like the new house?

Having moved to a house that DH fell in love with and which needed loads of work - who does he think is going to organise the building work? Is he? Presumably not if he works in the city? Do you really want to organise building works? It is very time consuming, really astonishingly so, and will mean that you have to give up other things to do it.

Remember interest rates are low atm so factor in whether you can afford it at say 10% or above

How desperate is the kitchen - is just out of fashion but basically solid or is is falling apart and unhygienic.

Personally I wouldn't stretch too far. Interest rates are only going up!