FTB £480k mortgage - too big?

getmore4less

if you went for the sprog for the 2y time frame and carried on £1,100 + £3,800.

£2k payment around £446k owed and savings back up to £93k in the bank on top of what's left from the £60k you are not using as a deposit.

You are far from stretched unless you go on a spending spree, you seem to have been living on around £1kpm might go up a bit with your own home.

Koldweather1

getmore4less wrote: »

Forgot to add before HPI and paying £2kpm
LTV 84%->78% in 2 years

Thats of course assuming HPI continues to happen, no certainty, especially in places already overheated such as London which is already seeing small annual falls, could just as easily see them back above 85% with even these modest 1-2% falls happening at the moment. A bigger fall and it might get harder to remortgage full stop.

Also, without wanting to go all Crashy, interest rates are on a slow and steady crawl up, could they afford to repay the mortgage if things ramped up any quicker than expected? For example how would they cope at 5-6% BASE rate, SVR probably upto 7-9% at that point?

Just something to consider, I think they are probably taking in something of a risk at a time when global monetary policies are steadily shifting back towards more normalised IR. I'd still say they should go for it mind you!

Good to see you have a nice big savings though, if things do get tasty in the IR department at some point, I suppose you could use that if it comes to it!

getmore4less

Koldweather1 wrote: »

Thats of course assuming HPI continues to happen, no certainty, especially in places already overheated such as London which is already seeing small annual falls, could just as easily see them back above 85% with even these modest 1-2% falls happening at the moment. A bigger fall and it might get harder to remortgage full stop.

Also, without wanting to go all Crashy, interest rates are on a slow and steady crawl up, could they afford to repay the mortgage if things ramped up any quicker than expected? For example how would they cope at 5-6% BASE rate, SVR probably upto 7-9% at that point?

Just something to consider, I think they are probably taking in something of a risk at a time when global monetary policies are steadily shifting back towards more normalised IR. I'd still say they should go for it mind you!

Good to see you have a nice big savings though, if things do get tasty in the IR department at some point, I suppose you could use that if it comes to it!

look at their numbers again, £1,100 rent and saving £3,800pm living off around £1.1k

lets put the living expenses up to £2.5k leaving them with £3,500 to throw at a mortgage

worst case they don't pay anything off
£480k 25y 7.4% £3,512
£480k 30y 8.0% £3,520
£480k 35y 8.3% £3,515
£480k I/O 8.8% £3,520


Covered for some fairly hefty rises while waiting for the disaster to happen they will be putting away a £2-3k a month and paying down the mortgage 3% a year.

They are skipping a rung or two on the ladder that's £30k-£50k saved.

The crash you look for a lender with a history of decent retention offers

if they were spending this money and used to the lifestyle that brings it would be different as it would mean hard cutbacks but they have been saving so have loads of headroom to deal with any rate rises and before long with restored savings a single job loss.

When your earning £100k and living the £30k* lifestyle you can put a lot more into assets than the normal average person which is where the multiples and limits come from.

---

*£15kpa brings in £1100, one income pay the rent, the other the living costs.

jonnygee2

Mortgage lending criteria is fairly stringent - if you couldn't afford it you wouldn't get the money. 60K emergency funds also seems more than sufficient to cover any unemployment you may unexpectedly incur.

Ultimately it's much more astute to stretch yourself and get a property that you can live in for 15 years or more, than to buy something smaller and need to move. That way you can concentrate on making it your own place, and won't have to go through the stress of moving or pay stamp duty / legal fees etc twice.

You shouldn't worry too much about potential rough patches. If they come you will most likely find your way through. You have savings and probably the ability to temp or freelance in the event of a redundancy.

Worst case - you could get income protection insurance, however I think if you are reasonably employable and have more than 3 months income in savings this is probably a waste of money.

demontfort

Based on my recent experiences my advice is get yourself a decent broker as that's a big loan to income multiple. I've recently gone direct for a £390k mortgage with a larger deposit (£170K), larger joint incomes (£145k) on a £560k property.After lots of back and forth with the underwriters it seems to have squeaked through but the bank told me there wasn't much headroom on affordability. In hindsight I would have used a broker as my feeling is that lenders are now being more cautious when dishing out these larger mortgages.

MF2015

demontfort wrote: »

Based on my recent experiences my advice is get yourself a decent broker as that's a big loan to income multiple. I've recently gone direct for a £390k mortgage with a larger deposit (£170K), larger joint incomes (£145k) on a £560k property.After lots of back and forth with the underwriters it seems to have squeaked through but the bank told me there wasn't much headroom on affordability. In hindsight I would have used a broker as my feeling is that lenders are now being more cautious when dishing out these larger mortgages.

That's only 2.7 x multiple incomes. You most have very high outgoings such as cars, maintenance or pensions if you struggled at that.

getmore4less

MF2015 wrote: »

That's only 2.7 x multiple incomes. You most have very high outgoings such as cars, maintenance or pensions if you struggled at that.

and/or it was a 2nd home and both applicants in new jobs one in probation the other one self employed....(previously both in 6 figure jobs)

https://forums.moneysavingexpert.com/discussion/5811809/second-residential-mortgage

MF2015

getmore4less wrote: »

and/or it was a 2nd home and both applicants in new jobs one in probation the other one self employed....(previously both in 6 figure jobs)

https://forums.moneysavingexpert.com/discussion/5811809/second-residential-mortgage

No quite comparing apples with apples.

Koldweather1

getmore4less wrote: »

if they were spending this money and used to the lifestyle that brings it would be different as it would mean hard cutbacks but they have been saving so have loads of headroom to deal with any rate rises and before long with restored savings a single job loss.

When your earning £100k and living the £30k* lifestyle you can put a lot more into assets than the normal average person which is where the multiples and limits come from.
.

The only other thing to also remember is child care costs,especially if its full time child care, that could quite readily knock 1-2k off that income given costs in London. I suppose though if IR do go up in a worst case scenario their savings could easily cover that through interest alone, so should still be ok!

getmore4less

Koldweather1 wrote: »

The only other thing to also remember is child care costs,especially if its full time child care, that could quite readily knock 1-2k off that income given costs in London. I suppose though if IR do go up in a worst case scenario their savings could easily cover that through interest alone, so should still be ok!

That's after 2y when they have another £90k in the bank or off the mortgage.

With a decent 2y plan this is doable on one income after that.