Question for the more mature moneysavers

jaype

My husband and I are almost in the position to buy a home, but I am very nervous about this owing to the current state of the market and the possibility of being stuck in negative equity should it all go pear shaped. I am working 2 days per week (self employed - approx 24k per year), while he is working full time for 28k. He has a part time internet business that will clear 20k profit this year and about 5k next year (our deposit) - it's selling a one-off product so realistically by then everyone who wants one will have it! We also have 2 small children and another planned soon. So - we need a 3 bed home. Ones in a bit of a dodgy but bearable area within walking distance of his work and near the kids school-to-be start at 250k (asking price) so we think we could get one for below 3%stamp duty.
With a 10% deposit we'd be looking at a 1350 per month mortgage, or just under 50% of our take home pay. Within 5 years I could take on a bit more work, and hubbie's job is very secure. But - I expect buying to be hard and to have to make sacrifices such as no holidays (not that we have for years) and tight budgeting, but is this really too much to pay out. Did people buying in the past pay this much? Thanks!

cattie

Have you got savings to fall back on if either of you were out of work or unable to work for any reason. You say your husbands job is secure, but ill health or disability can just happen like a bolt from the blue. How would you cope with only one salary coming into the home?

You need to remember that while it's possible to claim for help with mortgage interest should you ever have to claim income support through such circumstances, the maximum loan they will help pay interest on is £100,000.

Taking out adequate insurance cover for such possible eventualities is advisable so these should be factored into your monthly costs.

You also need to have a little bit of money behind you for when things go wrong in the house. Maintaining a house can be an expensive business & there is always something cropping up that needs doing.

If you feel nervous or unsure as you mention, then perhaps it really isn't the right time for you to be thinking about buying a property. That said, there are thousands of people out there who've been patiently waiting for another property market crash for years & have delayed buying because of it. If they wait long enough then it may well happen, but if they had bought at the outset instead of waiting on a pipe dream then they may have already have paid off a quarter or more of a mortgage & have paid a much lower price than current market values, so much less interest over the term too.

£1350 a month sounds a huge amount to me as I only have to pay £265 month on my repayment mortgage with 7 yrs remaining now, as I've reduced the term each time I've moved. When I had my first mortgage alone I was paying about a third of my net income on the loan.

Negative equity never bothered me as I was buying a home to provide a secure roof over my head. My view has always been that should the market take a dive it will eventually come back again at some point, as indeed it did after the last recession. Also it's pretty relative as if the price of your house drops, so does every other house in the country, so really the market just levels itself. As long as you don't overstretch yourself then you should be ok.

vansboy

Not sure what you're spending just now, on rent - but unless the repayments would really make it bad for you, should one of you be unable to contribute to the income, buying somewhere would be good, long term, most people will agree.

I'm not a big fan of many insurance schemes, but, again, in your sitution it'dbe more than worthwhile to check & double check, any policy offered, has the correct cover, in relation to the way your income/work is arriverd at. So many have get out clauses, requiring far too much 'proof of LOST income' wording, so take care on that one.

Not so sure on dodgy but bearable area. It would be better to look elsewhere, as it wouldn't be unusual for a poorer area to degrade further, where as the worst house, in the best area, should only get better - if you see what I mean!

VB

jaype

Well, hubbie will be publishing version 2 of his program in 2 yaers time so that would take care of any real emergencies on the home. He's also a teacher, hence the job security and good package, should he become ill or whatever. I'll need seperate insurance, though - I know. If I wasn't able to work we'd be stuffed. We already have an income protection plan for 1k a month for death and serious illness. Also, the area is near two good ones so I can't see it becoming worse...It's just a huge mortgage! And £350 per month more expensive than renting. Then there's the thought that we'll scrimp and save but once we get decrepit the government will step in and have it off us to pay for our care bills. *Sigh*

Doozergirl

I don't know where you live or what family support you have but my answer was to move north, away to a better area, better schools, cheaper house prices and I was able to give up the 'proper' job to boot. But I was also lucky that biy's family live here and I have a support network. No brainer.

You make it sound like a bit of a struggle and I'm not sure I'd be happy with that. How much more/less would the rent on the correct sized house in the right area be? You have to consider which way you'd be financially more comfortable because happiness does not exist in the form of bricks and mortar

Sapphire

Seems like a huge amount to pay each month with a relatively low income and two children. I would say it would be very risky to take on such a huge debt in your circumstances.

Ian_W

jaype wrote:

Did people buying in the past pay this much? Thanks!

As the title says a question is for more mature moneysavers - I presume this is the question you want answering.
My response is - does it really matter?
For some it would have been very hard, for others a lot less so.
What matters is what you feel is right for you - NOW. If you feel you can afford it then long term very few people would argue against buying your own property. If you don't feel you can afford it - then you'd be foolish to go for it and land yourself/family with big time debts and credit problems for years to come.

House prices sometimes go down - they will again sometime in the future but nobody really knows if that will be this year, next year, 5yrs or 10yrs hence. Do what you feel is right for you now rather than trying to find some answer in the past.

Doozergirl

I forgot the 'mature' bit. I'm not that at all!

I'd add to Ian W that some more mature people will have had great experiences of mortgaging themsleves up to the hilt and it paying off for them, whereas others may have thought they could afford and then things went really wrong for them in a recession.

I agree with Ian W (as per blinking always!) it's about you, right now, and I answered your question based on how I'd see things now. I only have the benefit of a rising/steady market behind my belt but I'm still concerned for you, OP, so I hope that means something

jaype

Sapphire wrote:

Seems like a huge amount to pay each month with a relatively low income and two children. I would say it would be very risky to take on such a huge debt in your circumstances.

A relatively low income???? I thought we were doing well on 52k as 1.5 times earnings. Isn't the average something like 27k full time? Did the rest of the country become multi-millionaires without me noticing? We are only 33 and 35... As for above - we are currently spending 800mp on rent but the place has chronic condensation and no garden. Desperately need one for ours and the kids sanity. A two or three bed with garden would cost between 900 to 1000 per month, while as I said the mortgage would be 1350 currently (would get a 5 year fix at least to cover us until kids are at school at least 5 mornings a week adn I can take on more clients). My parents live in Cornwall, so no difference in prices between our bit of London and there... and dh would be paid less if we moved as he'd be on outside London rates.

Amitoocautious

We earn almost 90k a year and i would not be happy with that size of mortgage merely because i want to have children at some point and not have to rush back to work but on a single salary that would be incredibly tight once all the bills etc have been paid. We are renting at the moment because our rent is half what the mortagage would be on a similar property and we can save a great deal of money a month.

Amitoocautious

We earn almost 90k a year and i would not be happy with that size of mortgage merely because i want to have children at some point and not have to rush back to work but on a single salary that would be incredibly tight once all the bills etc have been paid. We are renting at the moment because our rent is half what the mortagage would be on a similar property and we can save a great deal of money a month.