Would this be over stretching or safe enough?

Brinkster

Hi, newbie here.

We are offering on a house at £250k, which is the top of our agreed budget. I was just hoping for some second opinions about how do-able the finances will be.

We are in our late 20s, married with a new baby. I gross around £30k and my wife was on about £33k before maternity leave. She will be going back to work in 4 months, at the very least for half the salary part time at £16.5k, but a full time job is open to her. We have both fully cleared our student loans and both pay into final salary pension schemes.

Our joint net take home from our jobs would therefore be around either £3,700 if my wife goes back full time, or £3,050 if she goes back half time. In addition, we get £88 a month from the basic child benefit payment. So monthly take home is either around £3,138 or £3788.

I have secondary self employed income of around £250 a month after tax, and my wife has the option to work a couple of days extra a month, self employed, for another £300 gross. However these extra self employed income streams are not used on mortgage applications because I prefer to see them as a bonus, and stick to basing calculations on our basic salaries.

On the £250k purchase we'd be putting down £51k deposit, so a mortgage of £199k. For stability I prefer the 5 year fixes, and at the 4.19% mark they would be around £1,070 per month. We currently rent at £800 a month but do put a lot away each month.

After the deposit we would have savings of around £35k - £40k left over. I know savings rates are poor (most would be in an ISA at 3.1%) but I like having something there to fall back on and for bigger purchases when required, rather than ploughing the whole lot in as a deposit to save 1% interest a year.

In terms of other costs, we have 2 newish cars, bought for cash so no finance, no loans to service, and our monthly average expenditure including shopping, utilities, petrol, insurance, baby stuff, council tax, etc etc, comes to around £970 a month (if my wife goes back half time, it would save around £60 a month in petrol costs to offset that). Childcare is free as both sets of grandparents live locally.

So, my question is, will we be over stretching by using the top of our agreed budget? It seems very daunting to owe nearly £200k. Or would we be safe enough to have enough to cover the payments and live reasonably with a baby to take into account too? :eek:

Any advice appreciated. We've taken on a mortgage before and sold up, but this is a lot bigger than our first purchase was.

Brinkster

I'm judging by the lack of response so far I was a bit too wordy?! To summarise for people not wanting to read it all:

Net basic monthly income: £3,788 (wife f/t) or £3,138 (wife p/t)
Approx monthly outgoings: £970 or £910
Proposed monthly mortgage: £1,070
Savings after purchase: £35k - £40k (net interest around £100 p/m)

Thanks.

BitterAndTwisted

So, your worst-case scenario is that you will have more than a grand left over after you have paid the mortgage plus all other necessary outgoings each month and will still have about £35k stashed away in savings?

That doesn't sound anything remotely like over-stretching to me. Lucky you!

hcb42

would seem ok to me, I too would keep the buffer, we take home about 5K and mortgage is £1100 although our outgoings are higher. (fuel to work is£500 pm for example)

Starting

How do two young people have so much cash laying around? How are you able to put down a £55k deposit and still have £35k or more to stash away plus able to pay outright for two new cars and been able to clear your student loans. It doesn't feel that believable to me unless your parents have been very generous

Fire_Fox

Welcome. Give us a little more time to respond please! Complete a Statement of Affairs, only you know what your outgoings are, what you think you can live on. Be sure to consider what happens if you have a second or third child, what happens if one of you falls ill or injured and cannot work or cannot take care of your children. At the very least you should have three months mortgage payments set aside.

BitterAndTwisted

Squirrely savers for a long, long time? An inheritance? A huge amount of equity from the sale of their previous property? Or maybe a combination of all three. A combined gross income of nearly sixty-five grand goes a long way if you live modestly and don't waste your money every month

BitterAndTwisted

Fire_Fox wrote: »

Be sure to consider what happens if you have a second or third child, what happens if one of you falls ill or injured and cannot work or cannot take care of your children. At the very least you should have three months mortgage payments set aside.

Once they've bought this property they will have three years-worth of mortgage payments in savings. Maybe more. Luxury!

evuliuxb

We are in a very similar situation! We are in late 20s, earn similar salaries and have similar outgoings and are taking similar mortgage. We think we will be fine and hoping to save some money as well each month;) Also, as you've done your sums already, shows that you will be fine, some people take mortgages out without any though of how are they going to afford it :eek: have some friends, who nearly took a mortgage out without any thinking about their monthly budget and actually when we prompted them to add the figures up, worked out that they would be overspending by about 300-400 per month :eek:

Brinkster

Starting wrote: »

How do two young people have so much cash laying around? How are you able to put down a £55k deposit and still have £35k or more to stash away plus able to pay outright for two new cars and been able to clear your student loans. It doesn't feel that believable to me unless your parents have been very generous

We didn't buy 2 brand new cars, they were nearly new, a couple of years old. I wouldn't waste money on a brand new car.

Our savings are from a combination of equity released from our last sale (about £29k) and a lot of hard work. We both worked part time through uni so left with no debt. I took out a student loan to accrue interest in savings while that remained profitable, then paid it off when it didn't. Our parents have helped in so far as paying for our wedding, plus a bit of money when trusts matured when we were younger, but mainly it is hard work and not over spending on stupid things.

Cara79

Starting wrote: »

How do two young people have so much cash laying around? How are you able to put down a £55k deposit and still have £35k or more to stash away plus able to pay outright for two new cars and been able to clear your student loans. It doesn't feel that believable to me unless your parents have been very generous

I think that's incredibly harsh.

I can't speak for the op, but both myself & my bro were left approx £10k in inheritance. The rest has been saved up. For example, I managed to save £800-£1k per month whilst living at home & paying rent (albeit about £250 p/m so I realise that was hugely subsidised)

By the time I bought I had about £60k & my bro had closer to £100k altho he took more risks - investing in gold etc etc & getting big returns.

I'm now 30 & have about £100k equity plus £30k savings.

So I don't think u can say he is lying. Plus it looks like he has a good wage

OP, it does sound fine to me. Our mortgage is £950 & we bring home less than u do in wages
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