Increasing mortgage - advice!

KatM

Hi

Just wondering what others think to our situation....and whether we are getting it all wrong.

Husband and I bought our first house 9 years ago. We have a mortgage of £66K, paying £485 per month. We have had our house valued and we have approx £109K equity in it and as it's a small 2 bed, we'd like to move up the ladder. He's 36 and I'm 33 - joint income of just under £38K (take home of approx £2300 - although husband does get overtime sometimes as well).

Seen a property we like for £220K. Saw a mortgage adviser yesterday and supposing we put £100K (and use pretty much the rest of the equity for fees) into next property it obviously means that we'd need a £120K mortgage. This scares me to death!

Based on a Nationwide fixed rate mortgage for 5 years at 5.34% our repayments would be approx £670 per month. I have factored in everything when budgeting (including savings, christmas etc) and we don't have much left at the end of each month. My concern is should we stretch ourselves now whilst we're still relatively young or sit tight and wait and see whether the market drops and whether interest rates drop? It's all such a gamble and no matter how much reading up of 'what might happen' you can guarantee that one person will contradict the other.

Are we aiming too high with the £120K mortgage on what we earn? - or is this amount the norm these days?

Any advice or help would be great! Thanks!

MortgageMamma

Hi Kat

What term were you taking the NAtionwide mortgage over ? You are both pretty young still so you could reduce the payments by taking the term

Saying that, a 120k mortgage on your earnings at such a low loan to value is good going for your age, I'm helping first time buyers on the property ladder all the time and really feel for them struggling to buy their first house and finding it so difficult

KatM

Thanks for your reply. The quote we were given for the Mortgage with Nationwide was over a 30 year term to try and reduce the monthly payments.

So you don't reckon we've got 'pie in the sky' ideas then? £120K mortgage just sounds a lot to me - but then I don't know what other people's finances are like so I wouldn't have a clue if we're in a good position or not!

robertbruce

Hi
I think you have a great opportunity here to get settled for life, with the only proviso that you don't panic if it gets tough.

The biggest cause of domestic problems is the lack of a pound in your pocket, which turns to blame then a search for a way out. Take the decision together and stick with that decision together.

The house will appreciate in value over the term, barring the biggest collapse in the history of the planet.... which CAN happen... but so can a meteor, so why think like that.

If the value goes up you can always downsize and keep a roof over your head. Just don't get too precious about a house... that's all it is... bricks and mortar ( OK ..paint, carpet ,etc,) Spouse and Family are more important.

If you can maintain payments, live together and support each other when it gets difficult, and enjoy the selling off and retiring part, then you should grab the chance while you can. The RIGHT house is difficult to find, and will get more so in the next few years. Interest rates will rise a bit before they ever come down, so prepare for that as well, and it could become more difficult to get a loan later, so take the chance while your income, equity and health all stack up. The house becomes an investment in your family, so support the investment together and support the family to do that. Go for it, but listen to more balanced advice than mine before you do :-)

KatM

What you say makes good sense - thank you! You've put things into perspective. I guess it's a case of if we don't do it now we never will. Just got to gain enough confidence to be positive and take the plunge! Thanks again.

MortgageMamma

robertbruce wrote: »

Hi
I think you have a great opportunity here to get settled for life, with the only proviso that you don't panic if it gets tough.

The biggest cause of domestic problems is the lack of a pound in your pocket, which turns to blame then a search for a way out. Take the decision together and stick with that decision together.

The house will appreciate in value over the term, barring the biggest collapse in the history of the planet.... which CAN happen... but so can a meteor, so why think like that.

If the value goes up you can always downsize and keep a roof over your head. Just don't get too precious about a house... that's all it is... bricks and mortar ( OK ..paint, carpet ,etc,) Spouse and Family are more important.

If you can maintain payments, live together and support each other when it gets difficult, and enjoy the selling off and retiring part, then you should grab the chance while you can. The RIGHT house is difficult to find, and will get more so in the next few years. Interest rates will rise a bit before they ever come down, so prepare for that as well, and it could become more difficult to get a loan later, so take the chance while your income, equity and health all stack up. The house becomes an investment in your family, so support the investment together and support the family to do that. Go for it, but listen to more balanced advice than mine before you do :-)

Finally, someone who see's value in family bonding, quality time and quality of life as well as just money! you are a true diamond, I couldnt have put that better myself

pbfhpunk

Hi I'm in pretty much the same position as you I'm 30 fiance 34 joint income 38k, selling my house for around 145k and got about 49k mortgage on it after borrowing against the original 36k to update it. We're looking to move somewhere around 180-190k and I'm basing everything on having a deposit of 50k so getting a mortgage of around 130k and it scares me to death, but then I just think of people I work with and my friends that have 180k houses with 170k mortgages! I've also done a budget for us looking at payments of at the most 900 a month and it's looking good so far! The more I scribble budgets or input figures into excel the more confident I feel about it.

I'd advise doing that, the more you can see it's affordable the more you can see how good it's going to be, and remember having a mortgage of around 700 a month on a house worth 220k is brilliant - well I think so anyway!!

Helen

lady_noluck

KatM, I know 120K sounds like a lot but when you think what you get for it, it suddenly doesn't seem that much after all. I've had a £120k morgage for the last 4 years on a £25k salary and i'm only 26 so if can do it i'm pretty sure you can!! Don't forget that if house prices go down, you may buy cheaper but it means you'll also have to sell cheaper, meaning less equity to invest. Good luck!!

KatM

Thanks everyone - you've all been a great help

Conrad

Kat its a small mortgage relative to many now. Remember if people get into difficulty they can always switch to interest only until back on thier feet in which case the payments would be £534 per month.

My mortgage is £458000 if that makes you feel any better.

KatM

Yeah you're right - thanks. Wow £458K - that's some mortgage!