100% mortgage over 30 years, at 4 times your salary- A sensible decision?

Adele_2-2

Hi, I am a new member so this is my first thread. I hope this was the right place to put this, it seemed the most appropriate. I'd really appreciate some advice please.

My husband and I are first time buyers. We have a child and as a result I now work part time and we have nursery fees to cover so money is tight. We have saved £4000 to cover likely moving fees but there is no way we can save a deposit within the next few years. We currently live in London but plan to move up north as there is no way we will ever be able to afford a decent standard of living in London, so we will want to buy a property somewhere in the North West

My question is this: given the fact that we really can't afford to save for a deposit and we are currently spending £1000 each month on rent (and have been for years) is it more sensible to get a 100% mortage with a fixed rate over a 30 year period? The mortgage amount we would be getting would be around the £160 - £170k mark (roughly 4 times our salary) so would be equivalent to or cheaper than the rent we are currently paying. We would hope that 5-6 years down the line we will have more money when we no longer have to pay nursery fees (currently we pay £600 per month on these) and we could then make some over payments on our mortage and reduce the term of the loan. Incase you think it's relevant to the loan term my husband is 37 and I am 33.

Kaminari_2

Can you fix the interest rate for the life of the mortgage?

Adele_2-2

I don't think so, the longest fixed rate term offered so far has been 7 years

knithappens

i did this, with a fixed rate for 5 years. Only way i could afford to buy. And needed to with me and two kids, and only one income.

irnbru_2

Adele wrote:

We have a child and as a result I now work part time and we have nursery fees to cover so money is tight.

Are you receiving or entitled to tax credits?

Generali

It's only really worth it IMHO if you envisage some pretty decent pay rises over the next few years. Otherwise, if you are absolutely at your limit financially, what will you do when the boiler breaks down or one of you gets ill.

fivemice

I think you need to consider the possibility of interest rates being much higher in five years time, and you might not have more money then/may have another child??

If you feel comfortable with it, then I'd say yes. If you weren't sure then I'd say give it some time and if it still feels wrong that perhaps explore buying a smaller place?

I would be reluctant to take out a mortgage and have it so that I had absolutely no money left at the end of the month. I appreciate you are doing this with your rent, but it's not quite so critical if you miss rent payments.

irnbru_2

Oops duplicate post, c'mon admins fix those glitches!

Adele_2-2

Thanks all, Generali and fivemice have both raised things that I am concerned about too.
Once we move we'll get our deposit back from our rental place so will have around £2k contingency money. Also with the move up north I've worked out that we should be around £300+ a month better off which does give us some slack in the system. Also I had factored in having a second child so we're thinking that it would be 5/6 years before we were out of the nursery blackhole. As far as pay rises go, who knows? The interest rate going up really worries me, but beyond say 5 years does anyone really know where we will be? I hope that the contingency of £300 a month would help and if things got much worse I would have to return to work full time.

Just to answer irnbru we do get tax credits

Little_John

For £170k at the moemnt you should get somthing pretty decent up here, you also need to factor in that wages are not so high up here but the cost of living is lower so its not all that bad.

Maybe you could drop the amouth you want to spend and get somthing that needs decorateing and save yourself a bit of money to get the costs down. a mate of mine just bought a place that has been newley done up it all looked fine until he moved in and there are loads of little faults, marks on the carpets, polyfilla everywhere walls needing sanding and painting again. he paid a premium for a renovated house and is having to redo lots of it and have new carpets. The seller even removed dimmer switches in the house and replaced them with normall switches.

barnaby-bear

Adele wrote:

We have saved £4000 to cover likely moving fees but there is no way we can save a deposit within the next few years. We currently live in London but plan to move up north as there is no way we will ever be able to afford a decent standard of living in London, so we will want to buy a property somewhere in the North West

My question is this: given the fact that we really can't afford to save for a deposit and we are currently spending £1000 each month on rent (and have been for years) is it more sensible to get a 100% mortage with a fixed rate over a 30 year period? .

If you can't save on London salary but expect to spend same on mortgage as rent up North, have you facotred in the fact that although stuff is cheaper out of London salaries are also lower and work harder to come by. That's why it's cheaper. The moving soemwhere worse paid but cheaper works if you can take a big deposit or some equity out of London, I don't see how relatively much more affordable in your case.