House purchase
 

Situation is thus:

Current house is valued at £125k (£50k mortgage owing)

We have fallen in love with a house on the market at £295k which we would hope to get for £285k.

This would mean that to make the move we would need to take out a £200k mortgage + equity from current house sale £70k + savings £15k.

Our current mortgage payment is a measely £275/month which is chicken feed to us. This would rise to something like £1100/month on a £200k 5 year fixed rate.

Our joint monthly income, post tax/pension/loans etc. is approx. £2800. Annual pre-tax salary combined is £55k.

What I am trying to get my head around is accepting the massive increase in monthly mortgage payment. I understand that our current situation and mortgage payment must be well below the national average, but just what is acceptable/affordable?

We have set our hearts on moving this year into what will hopefully become our family home for the next XX years. This house ticks all the right boxes and is even in the right school catchment area.

I would appreciate your views and experiences/situations relating to house purchases and mortgages. It seems a long time back to '98 when I bought the current property and this is a much bigger step.

Cheers

I wish my mortgage was only £200k!

How can u ask on here if your debt is affordable? I would say if you cant even figure it you shouldnt get it...if you can figure it out you should.

T

ps.....asking strangers if you have enough money is prob a bad start ;)

I appreciate that you want to go for it, and that you have set your heart on this particular property. My only concern is that the projected mortgage repayments are a fairly large proportion of your combined net salary. What would you do if one of you is made redundant?

What length of mortgage term are you looking at?

I'm sure there will be many differing opinions on this, and mine is as follows:

If you want the house that bad, and it does tick all the boxes, go for it.

Without knowing your personal situation (kids, your age etc) I can't comment fully, but I am of the opinion that if you want to strive for the best, you have to stretch yourself as far as you can.

You'll still have a nice percentage of equity in that house, and as the housing market continues to trise (1.1% Nat Av in december) your money will grow faster in a bigger house.

You WILL notice the large increase in mortgage payments, and it may well dictate a change in lifestyle (less eating out, 1 foreign holiday per year instead of 2 etc), but if you really want that house, then these will be acceptable comprimises.

The golden rule is, just make sure you can afford it with some money to spare. If you don't have enough money to go out every now and again for a few beers or a meal you will fast become depressed for working 24/7 just to keep your house, no matter how nice it is.

Good luck buddy,

shep

Tiggs,

You can make anything add up on paper but listening to other peoples life experiences helps sometimes.

Would be looking at 25 year term.

We hope to start a family in 2006 so would loose my wifes salary of £18k. However, my own salary is somewhat negotiable as I am sole director & 75% shareholder of my Ltd Company.

Personally I wouldn't be happy with a mortgage of 4 times gross household income, but then I'm fortunate in not having to live somewhere with outrageous house prices.

Can you live on £1,700 per month to, presumably, cover:

Heal/light/power
Insurance - car/house/life/medical
Travel costs/car servicing/road tax
Food/drink
clothes
phone/internet/mobiles
entertainment
holidays
kids?
birthdays/christmas
household maintenance - which will go up with a bigger house (as will your heat/light/power
Council Tax

And yet leave enough for a contingency in case of emergencies, not to mention savings/credit cards/reducing card balances, etc, etc, etc.

If the answer to that is yes, then thunk about it. If its no, don't even try.

D

You have to take into consideration, all the others as well, like <cough> council tax <cough>, heating, electricity, general maintenance, transport expenses, & all the other gubbins as well, personally i wouldnt make myself skint, because that what its seems you are going to do !

Me & my x had a 110k mortgage in a 150k house (mind its scotland), had a scoob, she had a megane coupe & led a excellent lifestlye & our combined salary was closer to 70k, we looked at other houses & knew we could afford 210 to 250 ish but would have to make changes !!! And i didnt want to !

Anyway thats my 2p's

Stephen

A good rule of thumb I was told is to aim for no more than 30% of your takehome going on your mortgage, works well for us. :)

The bottom line is whatever you feel comfortable with. IMHO you sound like you want to be told that what you are considering is the right thing, you are the only person that can answer that question.

Thanks for all the replies so far guys.

Bashing the calculator as we speak.

Another factor is that I have a good £750k tied up in my business (£500k owned property & £250k cash). I might start looking at some large dividend payments.

My mortgage is similar to the one that you are considering. BTW, if you can get £200k fixed for 5 years, repayment, for only £1,100 a month you are doing well. What rate are you being offered?

FWIW, my mortgage is a bit of a headache for me at the moment. I can still afford it but it has become a bit of a source of worry. The problem is that having a large mortgage forces you to maintain your income at a certain level. If you lose your job, you can only consider jobs at over £50k or whatever, which are harder to come by than, say, jobs at £30k. If you manage to maintain your income and resist temptations such as new cars, foreign holidays etc etc then it may work out well in the long run.

That makes a bit of a difference. My main worry is that there is very little capital in my ltd co., so if it goes tits up i could end up walking away with very little. Obviously, losing your business is undesirable, but losing your business and your family home is highly undesirable.

Your situation (and figures) sound similar to ours a couple of years ago. We had a 50k mortgage on a house we sold for 130k which was about £290 in total per month. I worked full time and the wife was part time and looking after our 1 year old daughter. We needed a bigger house and were looking for something from 225k upto 250k max. We eventually bought a house for 248k and the mortgage went up to about £800 per month (fixed). It was a big increase, especially as the council tax in the area had risen by a good percentage the year we moved :rolleyes:.

We haven't had a big holiday since we moved, and have had to cut back on a few things. It will take time to get to the point where we were before we moved, but when I think about where we live now (nice old house, big garen, nice quiet village, the edge of some beutiful coutryside and with a good selection of schools in the area) I know we did the right thing even though the first few years will be harder than before. Even so, we're "richer" than when we bought our first house. No furniture for six months, Portable TV on a cardboard box, No curtains, borrowing a lawnmower... Happy days... ;)

It's a big risk when you're raising the mortgage payments so much and really only you can make the decision.

Its all down to the individual perspective on money. I know if I was using such a high %age of my income I would'nt sleep at nights worried that the mortgage rate might click up a few points. You also get all the what ifs coming into the equation where you may need more/or have less coming in such as starting a family.
All personal choice.
Alas

We earn combined around 70-80, have a 235k mortgage and have no worries at all with no other debts/loans other than the mortgage. Mortgage is around £1600. Before you ask she has a 20k car, I have 2 motorbikes and life is great.

You only live once, if you are set on it then buy it, if you can't afford it then sell it.

Better to have been kissed by a munter than never to have been kissed at all!

I've bought a ridiculously oversized house in a beautiful area. It looks like I'm missing out on a ski trip AGAIN this year (haven't been for three years now, and it's the only type of holiday I look forward to). Our last summer holiday was in the Lake District. I can't buy a nice car like all you lot here and am stuck with our diesel jeep. I can't afford to do the conversion to the top of the house as I'd planned. Our mattress is on the floor for a year (though more as we can't find a bed we'd like). Last month I used a credit card for the first time in my life, as I went overdrawn at the bank. This summer, as my son's school fees take another hike, I'll have even less to spend on myself.

But every morning when I come into the living room, and every evening when I step out of the station to come home, and when I walk the dog round the streets - I'm HAPPY.

You may struggle getting such a big mortage based on that income.. But i know alot of lenders are revising their rules on this as alot have been stung by lending multiples of upto x6 salary, which is madness..

If you can afford the 1100 pm at the moment, then great, but what hapenens if interest rates rise.. Personally i would make sure you get a decent fixed rate to make sure that you wont be paying anymore, as even 0.25% increases in mortage rates makes a big difference on that sort of size mortage..

good luck anyway
J

Every morning when I step into the living room I think "is the fookin hoover broken or what?" :mad:


:D

CLASS : D: :D :D

Darren

:D

We have a similar size mortgage, you will make ends meet. I still cant believe how happy moving to our new place has made me. We have been in 6 months and are still adjusting to large monthly outgoings, (council tax is £180.00 a month!), but still managing to go out when we want. Its just going to take me longer to get the car how i want her than it would have done, but will get there in the end. Its worth it tho. Never been happier! If its what you want you will only regret it if you dont go through with it. Sounds like you have enough to fall back on if things do go wrong. Good luck to you. Hope you get it!

Quote:

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We have fallen in love with a house on the market at £295k which we would hope to get for £285k

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Offer £270K and hope to get it for £275K.

Don't forget stamp duty would be nearly 9k if you paid asking.

Make ya 1st offer 10% less than the asking price...........sis was an estate agent and she tells me that quite a few say yes. I the couple of years she did it, 2 people were bidding for the same house on 1 occasion only.

Chances are you will prob get it 15k cheaper.

My 205k mortgage costs 1250 a month (fixed). Remember life insurance will be pretty hefty on that aomount, say £70 a month.

As per Matt, you'll pay 3% stamp duty on the selling price which is £8550 at £285k.
A removal company with full insurance can add nearly £1000 plus you also have searches/estate agents/2 *solicitors fees and a deposit up front if they're awkward gits.
Remember £1700 will need to support 2 people. New born babies don't come cheap either and that's a third person to support.

As said before,its how much you really want it. If you do youll make it work. If you can manage your own company you can manage this. Just make sure your wife feels exactly the same and wants the new house more than the disposable cash for holidays/fancy dinners etc etc either wise you'll have a big mortgage and an unhappy wife.
Another piece of advice(imho) is in times of low proprty inflation its often sensible to suffer it out in your old property and save loads of cash. Then for each £5k less you borrow over 25 years you will save £1000s in interest payments which will help you later in life.
Everything as always is imho!

Its a buyers market at the moment, loads of properties coming onto EA's books as people try to sell while prices are still stupidly high. I'd put in a low offer (249,950 to avoid the SD increase) if you really want the place. Mate of mine recently got a new-build at 205k when the asking price was 250k (was 280k in june).

However its got to be said mate, as a few people have suggested, is it really a good time to be trading up and taking on a massive mortgage? We've had one hell of a house price boom, and as history shows they have always ended in bust (as is almost always the case with most types of asset bubbles). If I was in your shoes I'd hang on and wait - wouldnt feel good if you paid 250k for that, only to have it be worth 175k in a couple of years time.