Mortgage, house/garden/ disposable income choices - confused!

ElsieMonkey

Hi all.

I'm really confused about my choices so wondered if you could help! Sorry in advance for long post but thanks to those who get to the end and can help!:beer:

My fiance and me are moving out of London for financial/lifestyle reasons. We currently have a 180k mortgage on a 2 bed flat. We're selling to move to a 4 bed property by the sea with garden of which our choices range from 210k for a doer upper needing complete refurb and small courtyard garden, up to 270k for something we'd just want to put our own stamp on with a new kitchen/bathroom etc. in a nicer street with big garden. Most of the purchase will be funded by equity in our current flat and then the remainder with a mortgage. Depending on the property the mortgage could be as little as 60k or as much as 90k.

The idea of moving is to start a family (we couldn't afford child care in London), so when the time came we can afford to live on my partners wage whilst I can be a stay at home mum. I will also be able to set myself working from home which is what I have always wanted to do, but haven't been able to afford to throw myself into fully whilst living in London with the bigger mortgage and full-time employment. So we are being sensible and want to pick a house that allows us to live off the one wage when needed, but baring in mind this will be a minimum income as I will also over time be building my ability to bring in money through freelance work.

So, I'm confused about whether to go for a house with a bigger mortgage or not. A house requiring a 90k mortgage will give us a big garden and a nicer street (we ideally wanted a garden as we don't have that now and would both love the lifestyle it will give us) and this would leave us £225 EACH per month from my partners one wage, after ALL bills and necessities are paid for (money left will be purely for us to each spend on what we want - treats/meals out/clothes etc.).

The other option is to buy a doer-upper from around 210k+ but these tend to come with small courtyard type gardens so not ideal, but would mean potentially a smaller mortgage of around 60-70k giving us £260-£300 EACH disposable per month for treats/whatever we want, again just from my partners wage.

Anything I earn working freelance we are leaving out of the equation and seeing as a bonus, since when we have a child there will be time where I won't be able to work.

We have been saving for so long I've forgotten what feels like a nice amount to have as disposable income! Is £225 a nice amount? Is £300 considered a lot? Would you take the smaller amount if it meant you could have a lovely big garden as opposed to a small courtyard? Another consideration we have is, in a few years time when we may possibly have a child and I am a stay at home mum, my finace will be renewing the mortgage and assessed just on his one wage (at the moment we are applying with 2 wages). CONFUSED! Any opinions? :undecided

EmmyLou30

If you think you can comfortably afford the better house then I'd personally go for that. Especially if you plan on having kids - you'll want more than a courtyard. You could well end up moving again for a garden in the future with all the dead money that goes with that in terms of costs.

Of course if the outstanding balance of the mortgage would not be possible for your husband to obtain by himself then it's a non starter unless you can afford the lenders standard variable rate it will revert back to after your fixed term ends. You could end up stuck with your current mortgage and not be able to re-mortgage if your husband can't get a mortgage by himself. If this still works out financially then go for the garden.

Does your expendable income after deductions for essentials include saving? If you haven't budgeted for saving each month then £225 is going to be tight.

Bossworld

If it's any help, since my partner returned to work part time, we both put our full wages into the joint account (childcare is already taken out via Kiddivouchers, I've also got salary sacrifices for a few other bits like shares and pension).

We then both take out £300 a month (so £10 a day) for general spends so we're equal despite the imbalance in earnings. That covers gym memberships, mobile phone contracts, going out, petrol etc. The joint account covers the mortgage, usual outgoings, food shops, and circa £100 a month for general bits for the bairn.

All i would say is that £10 a day sounds a lot (particularly in the context of Oxfam style adverts), but all it takes is one big event like a football match, and you're then playing catch up for over a week.

It's been something of a struggle, but we've built up a surplus in the joint account and it means that when we hopefully move, we can still afford to maintain our current lifestyle. It also makes me wonder what I used to waste £700+ a month on, in our child-free past.

tl;dr version - try living on £225 a month first before you plan your next move around it

densol_2

Ive lived in 4 brand new houses and 1 doer upper. I hated that completely and especially with children - not a good idea to live in a building site. The difference between 60 or 90 mortgage is negligible in my view ( in the grand scheme of things ) and as you are moving for work life balance, I would go for the best house I could comfortably afford

ElsieMonkey

EmmyLou30 wrote: »

Does your expendable income after deductions for essentials include saving? If you haven't budgeted for saving each month then £225 is going to be tight.

Yes the £225 each per month is after we put all money into joint account needed to cover all bills, including personal mobile phones, contact lenses, vet for the cat, petrol money MOT insurance etc, food you name it, plus an extra £30 per month which can accumulate over the years. So £225 each really is to do what the hell each of us like without guilt or worry that it should be going on something else.

ElsieMonkey

EmmyLou30 wrote: »

Of course if the outstanding balance of the mortgage would not be possible for your husband to obtain by himself then it's a non starter unless you can afford the lenders standard variable rate it will revert back to after your fixed term ends. You could end up stuck with your current mortgage and not be able to re-mortgage if your husband can't get a mortgage by himself. If this still works out financially then go for the garden.

I think this may be my real concern - fear of the unknown! I wouldn't want us to go for something that works now, but 3 years down the line when we come to remortgage we get unstuck. We have done basic mortgage calculators online which say my partner on his current salary could borrow the mortgage amount himself, but I know these are only basic and obviously rates change. Maybe we should ask our broker to give us an idea based on just his salary for peace of mind?

ElsieMonkey

Bossworld wrote: »

try living on £225 a month first before you plan your next move around it

This is something I thought of in the past but forgotten about, but you're right good idea think we will def do this from next pay day!

We have been saving for years and I actually think we both have about this as disposable income each per month anyway. But would be good to know this is definitely the case so we can be sure of what it feels like. This amount of disposable income isn't great but it's not bad either. We still can have a meal out here and there, buy an item of clothing (although no big shopping trips admittedly), have the odd takeaway. Although I think my partner manages better than I do!

warby68

If you are moving to have a family, I would buy the better family house. I'd certainly trade £50 a month for it.

Broadly speaking, £60k and £90k are both quite small mortgages these days and wouldn't husband be expecting pay rises/promotions as well?

I'd risk it for the better house as long as the basics of affordability are right.

Its very personal though, how much risk you are comfortable with and what type of house you want.

I went part time when I had children 16y ago - we planned that I'd go back full time when they went to school. That never happened, I'm still part time. But we managed fine.

Fear of the unknown is hard to deal with but you cannot manage every single risk - you both sound young. So many things could change over time. It sounds like you will have the comfort of significant equity whatever happens, which many young couples starting a family do not so thats a plus when balancing the risk.

ElsieMonkey

warby68 wrote: »

If you are moving to have a family, I would buy the better family house. I'd certainly trade £50 a month for it.

Broadly speaking, £60k and £90k are both quite small mortgages these days and wouldn't husband be expecting pay rises/promotions as well?

I'd risk it for the better house as long as the basics of affordability are right.

Its very personal though, how much risk you are comfortable with and what type of house you want.

I went part time when I had children 16y ago - we planned that I'd go back full time when they went to school. That never happened, I'm still part time. But we managed fine.

Fear of the unknown is hard to deal with but you cannot manage every single risk - you both sound young. So many things could change over time. It sounds like you will have the comfort of significant equity whatever happens, which many young couples starting a family do not so thats a plus when balancing the risk.

Thank you, that's good to know that it worked out for you. We're 34 and are lucky that our flat has made us a good amount of equity and decided we didn't want that lifestyle of juggling 2 full-time jobs and childcare in London with a mortgage double the size of what we already have in order to have a house here. We are planning the finances very carefully but you're right there's only so much you can plan for.

Thanks all for your feedback, look like its unanimous! Providing it makes sense financially go for the better house an garden, and sounds like you all think £240 each per month just to have fun with is adequate. This has helped a lot, thanks! :T

ellie27

I have 2 children, ages 4 and 6 and would be lost without our big garden! You are considering children down the line so I think you should buy the house that would best suit that. I cannot understand how a 4 bed house can only have a courtyard! Seems mad to me!

Location is key for us, so the best street and big garden. Per month the difference is not much at all. As long as you can afford it!

AnotherJoe

The advice is always to buy the worst house in the best street than the best house in the worst street. Possibly somewhat of a false choice, but the nicer street and a garden, especially if you are going to have kids, seems like the best choice.