Taking the biggest mortgage i can out

benalder284

If you are doing CIMA exams then you'll understand about cost variance analysis and uncertainty. Your plan leaves litte room for anything (mortgage rates, costs, future income etc) going the wrong way and as others have pointed out unexpected life events. Don't plan for the worse because you'll never get out of bed but do recognise that things don't always go as you would wish as well?

Dalfman

If it helps at all my Fianc!e and I are looking at houses around £150k. We have 10% deposit, zero debts and no finance arrangements etc. Between us we take home a household income of £86k. Whilst I appreciate we can afford to borrow a lot more, we have found a number of nice houses (not amazing by any means but good starter homes), in a good area and plan on overpaying the mortgage like mad from the word go. We agreed that we want to enjoy our earnings and plan on getting married next year and want the spare cash so we can enjoy life and not be a slave to the mortgage.

I appreciate we are at the cautious end but if we overpay and actually enjoy life, within 3 years we should have substantially more equity in the house, cash savings and then we can make the move up to a bigger and better home.

Either way I wish you luck with whatever you chose to do.

lee111s

Excellent outlook Dalfman

EvilJaz

I guess the debate is, because i am young.

Is it worth struggling for a few years in an OK house or better to get something with the intention of in 5 years changing it?

anukis

Hi EvilJaz,

I'm in the same boat (sort of) at £2800 net income and £1200 mortgage (except it wasn't exactly by choice, as I split from ex recently). I live with my child and plan to bring mum over to help with childcare so that I don't pay before/after school fees.

Expenses are very similar to yours - I pay less in transportation and more in food.

I think you can pull it off if you are willing to reduce/eliminate eating out, pubs, etc. and be VERY creative with holidays (less is more he he).

Good luck!


PS. One thing that offers me some security is that my dad promised to help with mortgage payments in case I am made redundant... Psychologically it helps. That, and knowing that rents in my area are higher than the mortgage I'm paying for a 2-br flat (SW London suburbs) :-) And in my line of work I need to be in London or close by...

EvilJaz

The redundancy issue is probably the only major issue for us.

My job is very secure, i know people will say i can not be sure of that but i am (though it does assume i don't move on).

The £2,800 net income is actually more realistically around the £3,000 mark. Not counting that on average i bring home £200 a month mileage which more than offsets the overly high petrol prices.

For the last year we have comfortably saved £2,100 a month which is more than enough.

Mortgage rates will not be an issue as i am going for a min of a 3 year fixed.

anukis

I also get a 10% bonus at the end of each fiscal which does help things... however that's not guaranteed.

I would agree with previous posters, if you can go for a lower mortgage you would perhaps enjoy life a bit more... but then you can also learn to enjoy life more with less money :-)

For me it's a no brainer, I can't possibly go back to renting now, rents are higher than my mortgage, landlords can kick you out when they want to sell, and.. I can't imagine having a mortgage when I retire.

Also savings & pension funds are volatile these days, so a roof over my head (paid off) is not such a bad idea.

motherofstudents

Interesting thread. My son is in a similar position although he and his girlfriend have a house already but want to move up. Just a thought, could you go for a smaller mortgage but make overpayments so that you are paying out £1k. This would give you an idea how easy/difficult you would find it whilst also increasing your equity. To be honest I don't think £1k is that much when you consider that lots of people pay around that in rent.

eta when we got our first mortgage we were very cautious and risk averse and I have always regretted not going for a better house right from the start.

EvilJaz

Again many thanks for all the advice.

I'm trying really hard to try not rent as it's would cost the same and i would at the end of it have nothing to show for it.

In an ideal world i obviously would like a lower mortgage. But to get anything worthwhile 240k+ is the absolute minimum that you need to spend in my area.

I'm thinking just go for it, it will be tough but in the long run i believe it will pay off. Worse case scenario i could rent it out? and in my area it would go for more than the mortgage is. Any major issues, such as broken down car i do have the privilege of the bank of mum and dad.

chequer71

Depends on what you mean by "worthwhile". If you're only planning on it being the two of you for the foreseeable future, how many rooms do you really need?

Or is it more the case that you see your mid and long-term futures in that specific area so want to be as ambitious as possible now with the view to settling there for a while as prices might have risen significantly in 10-15 years time?

Have you been monitoring rightmove for a while to see what goes for what? Problem seems to be that you are leaving yourself very little leeway, not just in view of later problems but in view of your options in 5 years time. There's little space left for overpayments and on a mortgage that size you're going to predominantly be paying off the interest for a fair time.

Is there a compelling reason not to settle for something more modest in the meantime? You could take a nice one-bed, aim to make overpayments at the rate of a higher mortgage, see how things go, and find yourself with better equity in 5-years time and in a more flexible financial position to decide upon your next step.

Another option of course is a longer mortgage term. I've seen arguments both ways for it, but it's not something we're really considering at the moment. Wonder what more experienced posters would advise on it considering your scenario though?

We're earning just over £50k at the moment and have slightly lower outgoings. Our thinking is that the parameters of £160-190k will set us up with either a decent 5-7 year place or a good 10-12 year one in our area (zone 3). We're a bit older that yourself though and planning for kids, so maybe thinking a bit longer-term than you'd want to be right now?