panic - am i borrowing too much?

pip27

I have been house hunting for 8 months. Me and my kids have been staying with family during that time while we relocate. After a failed relationship i am buying on my own again and have just had an offer accepted on a great little house. Only trouble is I have had to go to my absolute limit and now i am worrying that i have gone too far.
I am a part time (.7) teacher and am looking to borrow about 90,000. We have agreed on a purchase price of 185,000. I don't have any loans or credit cards but this will leave me with no buffer in the bank. I have tried guessing at budgets but am struggling to make it add up. The good thing is I will have a small spare room and am thinking I could let it to a student so i have an extra income. I think I could just about make it work but is it a mad idea. On the other hand if i get a cheaper house money will still be tight and I won't have the option to let a room. Also, I keep saying to myself, 'well its still cheaper than renting so what are you worrying about'. I think that because things have gone wrong in the past I am just naturally cautious but the other part of me just says if i want a home for me and my kids I should just go for it. What do you all think. Is this too much or do you think its reasonable. i really want the house but am just scared. Help!

luckyfool

You don't mention what your salary is as a teacher. Is your main concern the size of the borrowing relative to your salary, or the fact that putting all your money down effectively wipes out any rainy day fund you might have?

pip27

both actually. My salary is about 21400. My salary does go up incrementally but not by much. Also, because I will be borrowing more than I had originally planned I can't put any away for a rainy day. This is pairing everything down to a minimum. I used the money saving expert budget tool but its hard to plan for a house when you don't know what the bills will be. does this seem like way too much on my income. I have two teenage daughters to feed too

Squish_21

I wouldnt sail too close to the wind if I were you. As a rough guide you should be borrowing 3.5 times your salary i.e £74,900.

I'd check with your estate agent on the going rate and demand for renting a "small spare room" to a student- it may help you decide whether a 90K mortgage is do-able on your wage.

Make sure you include absolutely everything in your MSE budget tool and over estimate if your not sure on anything. Oh and factor in some monthly savings no matter how small.

Hope this helps.

pip27

yes, thanks. Thats my worry

Squish_21

The rent from the spare room may be enough to keep you away from sailing too close as longs as you can cover it when you have no student.

Another idea...are your daughters older teenagers i.e at an age when they already/will soon be getting themselves a job? As soon as i got a job at 17 I had to pay housekeeping.

I am probably not helping at all here but am trying my best. lol!

luckyfool

Thats about 4.2 times your basic salary, and assuming you have no credit card debt or other loans it would be achievable from a few lenders.

I take it you receive child benefit as well, also have you made sure you are claiming any child/working/family tax credits that you are entitled to?

beecher

Have you worked out how affordable the mortgage would be if rates went up to 7 or 8%? If you're strictly at your limit with low rates then I think you're right to be concerned.

pip27

no your help and advice is soooo welcome. I am pulling my hair out trying to decide whether i am being rash. But then i think that taking risks is necessary in life sometimes. You see, if i rent, i cant get a place for less than 700 a month (not a nice place either) and i wouldnt be eligable for any support with money in the bank. That makes mortgage repayments of 550 a month seem like a good option. (or am i just tryin to talk myself into it). my girls are 10 and 13 so no they cant earn any keep yet. Also, there doesnt seem to be many houses to choose from for less, any i have seen need loads of work doing to them anyway which also costs less. Weve been staying with family for ages and long for our own place again and i really do want to get back on the property ladder. Just dreaming of that lottery win i suppose. lol

pip27

yes i get child benefit and a small amount of tax credit. Was going to go for the hsbc five year fixed rate at 3.99 but they just pulled it before i could secure it. I was figuring that if things were going up really bad it would give me time to sell and downsize slightly and maybe there would be more choice in the market place then.

pip27

by the way, its so good to get other peoples perspective on this. I know i'm talking my self into it but basically its all down to me and i think thats what scares me most. thank you all for posting. keep up the advice.