Play it safe or Go for broke??

RoxieW

We're planning on moving next year and have a bit of a dilemma. We have a joint income of £38000 and have seen some beautiful houses at around £200000. We'll have saved £10000 and should get at least £10000 from our current house so would need to borrow £180000.
Do any high street lenders with decent rates lend at this amount?
I'm aware that the income multiple is about x5 and so is high and my husband is reluctant to stretch ourselves. However, I think we should go for it. My reasons are that
a) we can afford the repayments with a bit of leeway should rates go up,
b) we'd like this to be our final family home (we have two young boys) so i feel we should stretch ourselves in the short term rather than play it safe and keep saving to move again in future
c) we're both young (25 and 26) and so our wages are likely to rise (hubby has had on average £3000 per year rise)
d) at the minute i'm only working a few hours as our youngest is not at school yet. when he starts school i'll be increasing hours.

Hubby on the other hand is concerned about stretching ourselves and worried about keeping up with rate rises. I think all the horror stories of repossessions at the minute are scaring him. But then, if the situation got impossible, I'd just increase my work hours.

Any thoughts/advice would be appreciated.

dannyboycey

Hubby sounds like a very sensible man. Listen to him.

Amitoocautious

Personally I would wait until your income was higher and besides if the bears are right then you may be able to pick something upp in a year or two much cheaper. Can you not stay in your current house for a while? To be honest you will be lucky getting a 5 x income at the moment with the credit crunch as it is.

I wouldnt want to strecth myself in your position, we earn 90k between us and i didnt want to go for more than 200k otherwise you cant cope very well when interest rates rise etc

wymondham

I would agree with the above, sit tight and save, you'll gain in the long run.

sarkin

Can you let me know where you live as 200,000 will only buy you a 2 bed semi where we live. I asume 2 bed semis are not your dream house? As for the income, I earn around that kind of money and would never borrow that much. If rates go up 2% over the next five years this will wipe out a lot of your pay rises.

RoxieW

thanks for responses so far.
we're moving up to west yorkshire where £200000 will buy a nice four bed detached.
we could sit tight, prob for another year but i'm worried about prices rising even more and being out of reach, plus we really want to be closer to family up there (my dads not well).
at the minute we're saving £700 a month which is the difference in mortgage that we would be paying. we have a spare £200 mth which would cover rate rises in the short term (or we'd go on a fixed deal).
when we move and i'm working more hours our income will be about £50000 but when we're looking for mortgages we'll need to apply for a 5x - are companies still lender at higher multiples?
i think go for it - if things get sticky we can cut back/work more hours/go interest only in the short term?
but clearly the advice on here is to the contrary - food for thought definately

silvercar

I can see your point, your safety net is the extra hours you could work. Also moving in itself costs so much that to do a big move now instead of a move now and then again in a few years time is appealing.

If you were going to do the extra hours now, so the money was already part of your income, I would be happy with your plan.

poppy10_2

RoxieW wrote: »

we could sit tight, prob for another year but i'm worried about prices rising and being out of reach

Extremely unlikely; even the most optimistic of people (e.g. Nationwide and the Council of Mortgage Lenders) are predicting prices will be flat or rise less than inflation over the next 18 months. Even if you don't believe there will be a crash, there's no chance of any significant price rises in the near future.

Listen to your husband! He is being very sensible, I think you are thinking with your heart rather than your head. :money:

RoxieW

hi silvercar
i was working up until recently and our joint income was £60000. but i decided to leave work to be a stay at home mum (i'm doing a bit of freelance work from home also) for the time remaining at home with my youngest (he's 3 and half) and to be able to take my oldest to school and pick him up (hes just started big school). although i loved my job, i hated putting them in childcare and hubby and i decided that while we have a smallish mortgage and can afford it i should have the time at home with the little one.
i'm confident that i'll be able to get a decent job when we move - even if its not in my field, i'll take a job in a bank etc. obviously the ideal is that i'll have a job all set up for when we move but i may not and when applying for mortgages we'll be on lower income.
but i know that that lower income is temporary, and even on that we can afford our repayments as we've proved whilst saving for the past year.

RoxieW

i am indeed thinking with heart - but also i know that if we move to a 'stepping stone' house, we'd be looking to move again within a couple of years and then theres the fees, costs involved to fork out again.
we could sit tight, its def worth thinking about - but we've lived here for longer than i wanted to due to hubbys job and i'll admit i've got to the stage where i'm desperate to be near family and friends again. i was estranged from my dad and was reunited with him and that side of the family only a year ago, and now he's ill so i guess thats giving me bad itchy feet.

pinkshoes

I wouldn't borrow more than 3.5x joint salary, and would put down at least a 10% deposit, if not more. You should always work out if you can afford your mortgage at interest rates of 12%, because although it's unlikely to get that high, it HAS happened, and if you can't afford it, you'll loose your home.

Could you not buy something smaller that has the potential to extend?! i.e. building above a garage, or a 2 storey extension on the back? That way you can get a reasonable mortgage, and then extend when you can afford it.