How far to stretch

Thrugelmir

pdarc wrote: »

I was hoping the banks would allow agreed payment break, or perhaps to switch to interest only for a while and then when back in employment to switch back to repayment...

If you are having these thoughts then you are overstretching. Payment holidays are regarded as authorised arrears. Which will impact your credit profile. Likewise a switch to interest only. Results in increased payments once the mortgage returns to a repayment basis. For many its a slippery slope that they never fully recover from.

So returning to a point you made at the outset.

I realise much of the first question will come down to inclination to risk and lifestyle choices but hoping to get different view points.

A mortgage is potentially a 25 year committment. Requiring month in month out payments. Not something which is flexible or changable as you wish. So better to take measured steps up the property ladder. Than attempt to climb too many at once, only to find oneself falling off entirely.

starbarboy

silvercar wrote: »

I disagree. If it is possible to have housing costs of say 20k and you earn 60k, then you can cope with housing costs of 50k if you earn 100k. If you needed to as your remaining money will be more in absolute terms. At the other end of the scale, if your housing costs were 5k I doubt you could survive on earning 15k.

Lots of people do survive on earning £15,000 whilst paying £5,000 housing costs. However, as the other poster said 1/3 was only mentioned as a rule of thumb not a hard and fast rule.

Best wishes

Stephen

pdarc

silvercar wrote: »

you could claim SMI (support for mortgage interest). It is restricted to a limited time and the interest only and "only" the interest on the first £200k. google SMI for more info.

Thanks - I didn't know this.

Thrugelmir wrote: »

If you are having these thoughts then you are overstretching.

I don't agree to this bit, as I am the type of person to ask these questions in any case and I am the risk averse type of guy when it comes to personal finance (but do need a push).
Given current interest rates I will be at the 1/3 income on mortgage level, which I am comfortable with. I'll have the usual 6-9 months savings backup but you just never know what will happen. Interesting your point that even if I do switch to interest only due to difficulties that this will still impact my credit history. That is concerning.

Thrugelmir wrote: »

better to take measured steps up the property ladder. Than attempt to climb too many at once, only to find oneself falling off entirely.

Very true - great advice.

michaels

japmis wrote: »

What would you recommend the poster then, silvercar and michaels?

Well the OP omits rather a lot of useful info such as whether there is one income or two and whether this might change in the near or more distant future and how much the income and property are. Also the type of job is not mentioned (some are more secure than others) but having paid of the original mortgage by age 30 suggests they did have a lot of spare income although even without the larger mortgage kids have a tendency to 'eat' money. There is no mention of whether school fees may be an issue.

If the OP is truly risk averse there are deals below 4% for 10 year mortgages fixes with the suggested decent deposit although obviously these will be less flexible.

AFAIK SMI is not available to those with any savings so this might be an issue if the OP did choose a mortgage with limited overpayment opportunity.

pdarc

michaels wrote: »

Well the OP omits rather a lot of useful info such as...

Hi -
I didn't want to give my bank details out so kept it high level
No seriously, i'll try to give a little more info without without going too far.

Two incomes although the 2nd income is very low/part time. I don't expect a change in income anytime soon for either myself or wife.

Job is fine in terms of security, it is skilled/professional and even in this economic state I was able to switch jobs at the start of the year with relative ease. I do wonder when I am 40-50 whether security will be the same, who knows.

Rather not state income or exact house value but it was a semi in outer London Z5.

Did we eat money? Well I think we are rather sensible but do have fun a long the way. We don't really eat out or do take aways much, we don't spend much money on pubs and don't smoke but we do go out and do affordable things. We also do enjoy the yearly holiday abroad. So I think we are pretty normal on lifestyle.

The little ones will be going to state schools, we simply don't pull in the income to take them private.

Interesting point you make about fixed rate and my inclination to risk. So I see a 10 year fixed riskier than 5 year to me. It might be strange but in my mind being risk averse is a low rate but also flexibility in a reasonably timescale. Making a 10 year commitment with possible ERCs if I decide to downgrade in less than 10 years because a change in my lifestyle... So I call myself risk averse but 10 year fixed worries me, even if the i rate was good. So I'm not sure what you call someone like me but that's my view...

Thanks to everyone so far, very useful. It's what fits for me as many have said, and a mortgage that of about 35%, 40% living costs/lifestyle, and 25% left over/savings feels about right.