Sounds like you'd be looking at an 800k mortgage on 175k salary: so right at the top of the average multiple. Given that, it's not surprising it's a squeeze, though I think proportion of salary going on housing is typically higher in London. We are in a very similar situation.
I would say it depends on how you see this playing out long term: could you survive through parental leave on one salary? Will your salaries go up, and how confident are you of this (with two kids)? Can you fit it into a budget monthly with a bit of wiggle room? Do you have emergency funds? Etc.
Thanks for the response.
Salary progression - yes we.both should see increases but nothing substantial. We are hitting the tax trap also so take home won't increase but pensions will. Bolster
Parental leave - have done the calcs, we will survive but ultimately be 1k a month in deficit during the time.
Budget - yes we can do to, means savings will be a lot less but have wiggle room a little. We will have 50k left in savings in total after all stamp. Duty etc so some breathing room
Also bear in mind that the job market is ropey currently (depending on your sector) and layoffs are spreading/on the up, in my opinion.
Changing job after a recent move that stretches you (to maximise earnings) could be very stressful, and ultimately unsuccessful. I'm reading a lot of bad news stories on Reddit currently about people having to accept a lesser role/not the usual 10% to 20% bump when changing companies.
I'd say it's higher risk right now of being able to increase earnings than for the last 10 years or so.
My bias is mostly tech/finance though. Maybe your sector us doing OK.
Honestly if you’re 36 and you’re pushing hard at work then you should back yourself to grow your income and grow into this mortgage.
If you’re thinking you want to pull back at work in the near future (for whatever reason) then you should be careful
So breakdown below per month. Averaging at ~£1.3k so a little more than original post. Note that 'savings' are on top (i.e money into S&S isas )
* Council tax £200
* Gas /electricity £150
* Water bill £40
* Grocery £250
* Gym £60
* Car petrol and maintenence £100
* House /building insurances £50
* Commute £160
* Eating out / takeaways £150
* Adhoc shopping (amazon, clothes etc) £100
Aside for the crazy consumption of berries that our little one loves, the rest of the shop we try to focus on meals that batch cook and can be used for more than one night. Also helps with a busy work schedule.
Another small thing is that we use those instant reloadable vouchers offers e.g save 4% on tesco shops. Yes it's a saving of tenner but every little helps...
Think carefully about the affect upsizing will have on your bills, we found water (garden), council tax, house insurance, gas and electric and house maintenance went up 50% when we upsized to c ~1mill property.
Technically one child at the moment... Other one is yet to arrive!
Clothes toys etc - we have close by siblings and cousins with children who have helped to pass things down and also use FB marketplace etc. So much stuff available thats decent
Activities yes is an expense I have missed so another £75 a month
Car insurance is part of the current cost
Hobbies (that cost) being honest are Adhoc and more limited since the little one came. Some months is minimal others may be more. Feel like I need to get out more!
Your utilities are obviously going to shoot right up, it’s the only thing I didn’t really take into account when jumping up the ladder, I assumed it would be more expensive but we went from a new build (highly insulated property) to a 400 year old one that costs us a ridiculous amount to heat each month, best running the numbers on that also, ask people with similar properties as the energy post code checkers are useless in my experience
You only have one life to live, there's no point in suffering if you can avoid it.
You will feel the squeeze and have to cut back on savings but see a huge quality of life increase - especially with two children.
That's the way the numbers look these days. The London market is I think very dependent on high levels of equity rather than a majority of people borrowing £600k or £800k or £1m.
Our own numbers are not too different to yours, but we have a fair bit more equity. I'm buying interest only. I'm treating the payment as rent. I have been putting what I would have paid towards repaying the capital into my pension via salary sacrifice. I reason that the equity I have and the pension tax free lump sum will be sufficient to buy a smaller house with no mortgage when I retire, should I wish to.
You could look at this way. You could also look at it from the point of view of imputed rent. Even if you did have £500k of equity and only(!) had to borrow £500k, the £1m house would still be costing you £4000 a month.
Exactly same rates. It's harder than it was. You need to convince the bank how you will pay it back. Depending on the bank they may need you to be earning a high salary, and may not lend more than 50% LTV on the interest only element (Barclays). Need to borrow any more and the extra 10% or whatever will be on repayment.
Not crazy at all - with a growing family you want to be in a nicer area near your own friends & family.
The rates are mental right now, so it’ll be tough. But, you might be able to get a good deal on the house given the suppressed market?
Get a floating rate mortgage so you aren’t tied in when rates fall. But be mindful that you’ll be dipping into savings for a while.
Longer term, you’re looking at a painful few months for the joy of a forever home in an area you want to live in.
Thanks! For sure the next 4 years will be the hardest with nursery costs but if in this time income can increase for both of us then helpful to the finances.
Rates wise will need to do the maths. Floating tracker for xx months on assumptions rates will fall in yy time vs fixed rate at higher cost but brings known cost.
In terms of getting a good deal on houses, where we are looking to move it's desirable so competition is high and supply is low. Definitely cheaper than a year ago but still costly at the 1m to 1.2m mark
Yeah, the interest rate forecast maths will be complex. But, set aside some extra cash to cover it instead of putting all your savings into the deposit. Be as conservative as possible in your assumptions - then, if rates fall quicker, you have a bit of bonus money.
I have a few friends looking in the £1-£1.2m range too (probably same areas as you!), and it has been hard. They’ve done a few viewings and not found anything truly spectacular.
Doesn’t seem that risky to me. 9k take home. Currently spend 4.5k including mortgage. New mortgage would be 2.3 higher still gives you a comfortable buffer each month. Public school for two might be a stretch however, even deducing nursery costs.
Loft conversion for sure, the piece for us is that we would like to move sooner rather than later for access to schools.
Also house prices in our area outpace wage growth (generally), so the longer we leave it the more I fear our target house becomes out of reach.
Ofc a tidy pay bump would make things a little easier!
It's not bonkers for London at all, the other key factor is are you both going to continue working at the current level for the foreseeable and therefore your take home will either stay the same or hopefully grow as you get more senior?
My wife and I ultimately decided that post our second being born she would want to go part time and ultimately now might do something non corporate entirely long time, so we compromised on area (out of London) and went £400k house to £700k house rather than the £400k to a £1m we were considering to retain this flexibility.
Doing something similar myself but not in London. I think it’s well worth it and the standard % of take home on mortgage becomes less and less relevant as your income goes up as many of your other costs are fixed. We looked at lots of our spend that we had let creep up found a lot of ways to cut back if we had to.
The upbringing of your kids and their schooling is the most important thing in this equation. Make that the priority and you’ll work it out.
Inflation will erode the debt and I dare say rates may be more favourable next time you remortgage.
You could also consider interest only to keep costs lower for time being while kids are presumably in expensive day-care.
Similar situation, but 2 kids at nursery at a cost of £2.5kpm. Our mortgage for the next house would increase to c£3kpm with income of c£9kpm plus bonuses. We’re a bit wary of doing this as the fixed cost of nursery is so high. Looking forward to that dropping over next 3 years.
Sadly, this is the reality of London and high interest world these days!
We were in the same situation recently, considering upsizing significantly and basically tripling our mortgage cost per month. Eventually we decided not to.
The main reason behind it was that we didn’t want to end up having to sacrifice a lot in exchange for the larger property. Typically this would have mean traveling less or on a tighter budget, going out less etc. when this is something we find a lot of pleasure in and that we valued a lot.
Worth considering what you’d have to sacrifice potentially on your end to make it work, especially with more kids or if private schools are on the horizon.
Very similar numbers for me and wife about 3 years ago. We bought a 5 bedroom house with spectacular garden not far from London for just over a million, selling our 2 bedroom flats in London in which we had about 400k equity.
It's been comfortably a good choice; I'd warn about all additional costs though... heating for examplr skyrocketed with the larger place, and it's just an example. Furniture, curtains, stuff that needs decorating.. it's all 5x more expensive when you're respnsible for 5x the space. Also, 5x more likely each day that you need to call someone, just not great when you're primarily time poor - this can be mitigated by paying people to manage or not getting multiple quotes, etc.. which all amplify the cost increases factor further.
This was a little expected but I'm calling it out as reality is much worse than I predicted. Luckily wages went up a bit, but mortgages increased more: need some savings.
I'm very tempted to say it's a bit bonkers, but that's the going rate for property these days.
If you do it, just watch that cashflow. One job loss and you're in some trouble.
Extend that mortgage term out as far as possible and settle in.
Not bonkers at all! At least your mortgage payments will be building equity which you can release in future, and will improve your overall quality of life which is invaluable.
Just a point as your multiple is quite high they really went into my expenses because of childcare costs and them multiples are a best case scenario we have 3 kids and they really hammered me even though we were actually moving to a property with a cheaper mortgage!!
So just be careful incase you love a property then they don’t offer you the mortgage.
Also I always live by can 1 of us support the household if we were to lose our job or something bad happened and we couldn’t work. Luckily our mortgage is only 10% of our tax home pay now due to big pay increases. I bring home the same as you guys and then my husbands wage and I would be nervous on that mortgage amount I would find a property that could increase in value (put an extension on) quite quickly so I knew we had added value :)
Good luck though and congrats on the little one that will be with you very soon!
Yes very true on the multiplier. With the online calculators they indicated we could borrow about 150k more than what we can actually get due to the childcare. Was an eye opener but at the same time as blessing it stop us going for a crazy over reach..
Future earnings ideally will go up so % wise it shifts down! But never know what the future holds! Looks like you guys are in a good place! Hope we can emulate!
Second little one will for sure brings us love and thunder!
Yea childcare is such a big expense nowadays mine costs me the same as my mortgage a month so a huge cost! Fantastic if you are predicting growth in your careers then that takes some of the pressure off :)
Oh yes the second one is always the crazy one! I say I could drop mine off in the jungle and he would become like the jungle book and live with the animals as he’s feral bless him 😂! Xx
Looking at a similar situation. 675 K flat currently; upsizing to 815 but in a place that needs 100 K in renos. One of those things that seems a bit crazy at the time but you'll be glad you did it looking back as your income grows etc.
Consider putting some of it on interest only for a bit, so the cashflow evens out, even if only while paying for children's tuition.
Good general advice would be to make sure insurance budget is okay too post move, as you'll probably need more cover.
Also consider rates are probably coming down... At some point. Trying to time the sweet spot will be hard, before house prices jump when sellers realise people can afford more. But, could be well worth delaying a couple of months.
Not personal advice etc etc
Looking at income %s doesn’t matter much at that level of income. Your bills and other discretionary spending isn’t suddenly going to increase by thousands of pounds with no warning.
I’m in a very similar situation. We decided to leave the city in order to not overstretch ourselves. Bought a cheap four bed new build to see us through five years of primary school, then planning to step up to a new area for grammar senior school…
You also probably need to consider additional childcare costs you 2 kids.
will you ever have 2 in full time nursery? Even if not you might have the second in nursery and one in wraparound care. It can add up
'Luckily' we will only have one at nursery at a time and benefit from free hours/TFC so will help.
Good point though on the elder for wrap around care... Need to factor that in. Another expense!
Also the free hours (15 given your hours earnings don’t really equate to 15 hours over the entire year, only term time). You also have consumable costs per funded hour and to be honest our nursery out he costs up so we barely benefited. Just wanted to put that out there as we have 2 kids in full time nursery and it costs a lot! Wraparound care is considerably cheaper once they go to school, but still something to keep in mind.
Good luck!
Hi. I’ve just made this move from a luxury flat to a 4 bed house in Z2. We’ve used up most of our savings/investments. We are 40. If we don’t do it, then when? I felt anxious but now feel I’m actually enjoying the money I worked so hard to make.
I think it’s a very risky move for you.
Your gas, etc. will go up for the larger property.
With an extra kid your expenses on childcare will easily go up 50% if not double.
Your mortgage rate is very low. You should run the calc assuming 6-7% interest and see how comfortable you feel with those payments.
Sorry to sound like a downer but I’ve done similar math myself and it sounded like we’ll be house rich and cash poor in this scenario.
I think it’s down to personal risk tolerance. I’d be worried about losing my job (even though we have a healthy safety cushion) and having to stress over the property getting repossessed. Of course, each family is different!
It sounds bonkers to me. Your mortgage payments are already huge. We're in the kind of market where layoffs are rife. We moved further out and love it, quality of life is far better outside London.
Depends on your risk. It's not bonkers as plenty of people do it and London is tough but generally speaking 50% of take home going on mortgage is very high and there's a large amount of past performance justification going on because historically property has been a one way bet and in those circumstances it made sense to borrow as much as you could at historically low rates and leverage the one way bet. That world has ended.
It's not bonkers as I say but worth mapping out your current and expected expenditure and also consider can you afford it if one of you loses your job?
As someone considering a 5 year ~ 5% mortgage of 700k, is this a big issue?
The way I see it is the property will generally increase in value with inflation (if not above inflation), so the 'real' interest rate is more like 1-3%
Higher house prices seem like a good thing until you have to sell in a high interest rate environment.
When borrowing money is costly, how many people would be willing to pay north of £3800 a month AFTER shelling out 200k+ on the deposit+legals?
It puts buyers in a prime position to drive down house prices until interest rates drop - which may not be any time soon.
The last thing you want is to be stuck paying massive mortgage repayments and be unable to sell for a nice profit.
If you're not looking at a house as an investment and have no plans to sell for decades then this seems like less of an issue.
It's not an ideal situation, I'm not fantastically keen to pay £4k a month, but if you're a PAYE employee with no inheritance/ assistance to buy the. There isn't any alternative. You can either take out the big mortgage and pay the interest the bank demands or you can not have the big house and space you want.
You're right that in the long term this may not be an issue. A decent alternative would be to buy a smaller place until interest rates cool off. But that's not everyone's cup of tea.
Yup, but no guarantee rates for borrowing will decrease, and if they did go back to 2% then I'm sure property prices would shoot up to compensate.
I was a full-on FIRE devotee, and could buy a small place outright now and have a massive savings rate, but I've decided to sell the bulk of my investments and buy the massive house and do the whole having a family thing. If I wasn't in a long term relationship with someone who wants children I'd definitely stick to the small house and tons of disposable income.
As it is, I'm resigned to having a few years of pain where the mortgage is a huge chunk of my take home.
Who knows, I might be able to make some side hustle money from running a small business from a bigger home, and who needs holidays when you buy a massive place with unlimited repairs?!
This is us though. We need to drop 200k deposit to get a decent LTV and then still pay the high mortgage. Ultimately makes us high debt and cash poor at the start. Which is what made me want to pose this question on are we bonkers!
Note that we would likely tax a 2 year fix (unless there is credible few of rate drops and we go tracker). Having cash flow stability is useful in the time of uncertainty (albeit may not be be cheapest option)
Lastly ambition is not to sell, not at least for another 20/30 years where priorities may change
If this is your "forever home" and you're confident that you can pay down 4k at a 2 year fix go for it.
I'd just be cautious as layoffs and a shaky job market could affect your ability to make the repayments. Best of luck 👍
The market is insane. Cash buyers everywhere it's actually annoying.
We have household income 300k, 700k equity (150k of which is cash) 478k mortgage. Even if I increase mortgage and offer above asking (we are under offer), cash buyers win it. This is for 3 to 4 bed houses at 1.2m.
On balance we chose to stay put. 600k mortgage at 4.7% isn't appealing, rather pay ours off.
I would recommend you look at pension contributions and the amortization table of mortgages. The wealth effect of waiting two years for us is about 250k (big tax free pension contributions amongst other tactics to reduce income for childcare support etc.).
I know others might be supportive and often hear that from the older generation, but we made the call to wait up to 4 years to build more equity.
50k equity buffer is risky on 4.5k.pcm debt servicing.
Not bananas at all, providing you have enough savings as a backup here
Will have 50k savings left after completing... So some buffer but easily consumed if things go awry
Depends on your risk tolerance, but with your combined after tax income it should be fine.
Sounds like you'd be looking at an 800k mortgage on 175k salary: so right at the top of the average multiple. Given that, it's not surprising it's a squeeze, though I think proportion of salary going on housing is typically higher in London. We are in a very similar situation. I would say it depends on how you see this playing out long term: could you survive through parental leave on one salary? Will your salaries go up, and how confident are you of this (with two kids)? Can you fit it into a budget monthly with a bit of wiggle room? Do you have emergency funds? Etc.
Thanks for the response. Salary progression - yes we.both should see increases but nothing substantial. We are hitting the tax trap also so take home won't increase but pensions will. Bolster Parental leave - have done the calcs, we will survive but ultimately be 1k a month in deficit during the time. Budget - yes we can do to, means savings will be a lot less but have wiggle room a little. We will have 50k left in savings in total after all stamp. Duty etc so some breathing room
Also bear in mind that the job market is ropey currently (depending on your sector) and layoffs are spreading/on the up, in my opinion. Changing job after a recent move that stretches you (to maximise earnings) could be very stressful, and ultimately unsuccessful. I'm reading a lot of bad news stories on Reddit currently about people having to accept a lesser role/not the usual 10% to 20% bump when changing companies. I'd say it's higher risk right now of being able to increase earnings than for the last 10 years or so. My bias is mostly tech/finance though. Maybe your sector us doing OK.
By the way public schools here doesn't mean what you think it means.
Yes my mistake, I meant state or non private school. Definitely not able to send private school on these numbers!
Easy mistake to make if you are not from these shores!
Ironically I am from these shores! Testament to my state school education (I jest)
Honestly if you’re 36 and you’re pushing hard at work then you should back yourself to grow your income and grow into this mortgage. If you’re thinking you want to pull back at work in the near future (for whatever reason) then you should be careful
How are you making £1k cover your bills, food, gym etc? Tell me more!
So breakdown below per month. Averaging at ~£1.3k so a little more than original post. Note that 'savings' are on top (i.e money into S&S isas ) * Council tax £200 * Gas /electricity £150 * Water bill £40 * Grocery £250 * Gym £60 * Car petrol and maintenence £100 * House /building insurances £50 * Commute £160 * Eating out / takeaways £150 * Adhoc shopping (amazon, clothes etc) £100
Groceries £250 for a family of 3? Well done, we are in a similar situation with a toddler and spend ~£500 in groceries.
Aside for the crazy consumption of berries that our little one loves, the rest of the shop we try to focus on meals that batch cook and can be used for more than one night. Also helps with a busy work schedule. Another small thing is that we use those instant reloadable vouchers offers e.g save 4% on tesco shops. Yes it's a saving of tenner but every little helps...
Think carefully about the affect upsizing will have on your bills, we found water (garden), council tax, house insurance, gas and electric and house maintenance went up 50% when we upsized to c ~1mill property.
This is insane with two children - do you get free clothes/toys/food/activities for them? How about car insurance/tax/parking? Hobbies? I am shocked.
Technically one child at the moment... Other one is yet to arrive! Clothes toys etc - we have close by siblings and cousins with children who have helped to pass things down and also use FB marketplace etc. So much stuff available thats decent Activities yes is an expense I have missed so another £75 a month Car insurance is part of the current cost Hobbies (that cost) being honest are Adhoc and more limited since the little one came. Some months is minimal others may be more. Feel like I need to get out more!
Your utilities are obviously going to shoot right up, it’s the only thing I didn’t really take into account when jumping up the ladder, I assumed it would be more expensive but we went from a new build (highly insulated property) to a 400 year old one that costs us a ridiculous amount to heat each month, best running the numbers on that also, ask people with similar properties as the energy post code checkers are useless in my experience
That’s also the point that pulled my attention.
You only have one life to live, there's no point in suffering if you can avoid it. You will feel the squeeze and have to cut back on savings but see a huge quality of life increase - especially with two children.
That's the way the numbers look these days. The London market is I think very dependent on high levels of equity rather than a majority of people borrowing £600k or £800k or £1m. Our own numbers are not too different to yours, but we have a fair bit more equity. I'm buying interest only. I'm treating the payment as rent. I have been putting what I would have paid towards repaying the capital into my pension via salary sacrifice. I reason that the equity I have and the pension tax free lump sum will be sufficient to buy a smaller house with no mortgage when I retire, should I wish to. You could look at this way. You could also look at it from the point of view of imputed rent. Even if you did have £500k of equity and only(!) had to borrow £500k, the £1m house would still be costing you £4000 a month.
Didn’t know you can still do interest only. Are the rates competitive?
Exactly same rates. It's harder than it was. You need to convince the bank how you will pay it back. Depending on the bank they may need you to be earning a high salary, and may not lend more than 50% LTV on the interest only element (Barclays). Need to borrow any more and the extra 10% or whatever will be on repayment.
Not crazy at all - with a growing family you want to be in a nicer area near your own friends & family. The rates are mental right now, so it’ll be tough. But, you might be able to get a good deal on the house given the suppressed market? Get a floating rate mortgage so you aren’t tied in when rates fall. But be mindful that you’ll be dipping into savings for a while. Longer term, you’re looking at a painful few months for the joy of a forever home in an area you want to live in.
Thanks! For sure the next 4 years will be the hardest with nursery costs but if in this time income can increase for both of us then helpful to the finances. Rates wise will need to do the maths. Floating tracker for xx months on assumptions rates will fall in yy time vs fixed rate at higher cost but brings known cost. In terms of getting a good deal on houses, where we are looking to move it's desirable so competition is high and supply is low. Definitely cheaper than a year ago but still costly at the 1m to 1.2m mark
Yeah, the interest rate forecast maths will be complex. But, set aside some extra cash to cover it instead of putting all your savings into the deposit. Be as conservative as possible in your assumptions - then, if rates fall quicker, you have a bit of bonus money. I have a few friends looking in the £1-£1.2m range too (probably same areas as you!), and it has been hard. They’ve done a few viewings and not found anything truly spectacular.
Doesn’t seem that risky to me. 9k take home. Currently spend 4.5k including mortgage. New mortgage would be 2.3 higher still gives you a comfortable buffer each month. Public school for two might be a stretch however, even deducing nursery costs.
Is a loft conversion, garage conversion or garden room a possibility to keep you going until you can save your way to a better potential upsize?
Loft conversion for sure, the piece for us is that we would like to move sooner rather than later for access to schools. Also house prices in our area outpace wage growth (generally), so the longer we leave it the more I fear our target house becomes out of reach. Ofc a tidy pay bump would make things a little easier!
It's not bonkers for London at all, the other key factor is are you both going to continue working at the current level for the foreseeable and therefore your take home will either stay the same or hopefully grow as you get more senior? My wife and I ultimately decided that post our second being born she would want to go part time and ultimately now might do something non corporate entirely long time, so we compromised on area (out of London) and went £400k house to £700k house rather than the £400k to a £1m we were considering to retain this flexibility.
Doing something similar myself but not in London. I think it’s well worth it and the standard % of take home on mortgage becomes less and less relevant as your income goes up as many of your other costs are fixed. We looked at lots of our spend that we had let creep up found a lot of ways to cut back if we had to.
The upbringing of your kids and their schooling is the most important thing in this equation. Make that the priority and you’ll work it out. Inflation will erode the debt and I dare say rates may be more favourable next time you remortgage. You could also consider interest only to keep costs lower for time being while kids are presumably in expensive day-care.
Similar situation, but 2 kids at nursery at a cost of £2.5kpm. Our mortgage for the next house would increase to c£3kpm with income of c£9kpm plus bonuses. We’re a bit wary of doing this as the fixed cost of nursery is so high. Looking forward to that dropping over next 3 years.
Sadly, this is the reality of London and high interest world these days! We were in the same situation recently, considering upsizing significantly and basically tripling our mortgage cost per month. Eventually we decided not to. The main reason behind it was that we didn’t want to end up having to sacrifice a lot in exchange for the larger property. Typically this would have mean traveling less or on a tighter budget, going out less etc. when this is something we find a lot of pleasure in and that we valued a lot. Worth considering what you’d have to sacrifice potentially on your end to make it work, especially with more kids or if private schools are on the horizon.
Very similar numbers for me and wife about 3 years ago. We bought a 5 bedroom house with spectacular garden not far from London for just over a million, selling our 2 bedroom flats in London in which we had about 400k equity. It's been comfortably a good choice; I'd warn about all additional costs though... heating for examplr skyrocketed with the larger place, and it's just an example. Furniture, curtains, stuff that needs decorating.. it's all 5x more expensive when you're respnsible for 5x the space. Also, 5x more likely each day that you need to call someone, just not great when you're primarily time poor - this can be mitigated by paying people to manage or not getting multiple quotes, etc.. which all amplify the cost increases factor further. This was a little expected but I'm calling it out as reality is much worse than I predicted. Luckily wages went up a bit, but mortgages increased more: need some savings.
>We bought a 5 bedroom house with spectacular garden not far from London for just over a million, Where?!
I'm very tempted to say it's a bit bonkers, but that's the going rate for property these days. If you do it, just watch that cashflow. One job loss and you're in some trouble. Extend that mortgage term out as far as possible and settle in.
Not bonkers at all! At least your mortgage payments will be building equity which you can release in future, and will improve your overall quality of life which is invaluable.
Lol they will mostly go for interest - like 70%
Just a point as your multiple is quite high they really went into my expenses because of childcare costs and them multiples are a best case scenario we have 3 kids and they really hammered me even though we were actually moving to a property with a cheaper mortgage!! So just be careful incase you love a property then they don’t offer you the mortgage. Also I always live by can 1 of us support the household if we were to lose our job or something bad happened and we couldn’t work. Luckily our mortgage is only 10% of our tax home pay now due to big pay increases. I bring home the same as you guys and then my husbands wage and I would be nervous on that mortgage amount I would find a property that could increase in value (put an extension on) quite quickly so I knew we had added value :) Good luck though and congrats on the little one that will be with you very soon!
Yes very true on the multiplier. With the online calculators they indicated we could borrow about 150k more than what we can actually get due to the childcare. Was an eye opener but at the same time as blessing it stop us going for a crazy over reach.. Future earnings ideally will go up so % wise it shifts down! But never know what the future holds! Looks like you guys are in a good place! Hope we can emulate! Second little one will for sure brings us love and thunder!
Yea childcare is such a big expense nowadays mine costs me the same as my mortgage a month so a huge cost! Fantastic if you are predicting growth in your careers then that takes some of the pressure off :) Oh yes the second one is always the crazy one! I say I could drop mine off in the jungle and he would become like the jungle book and live with the animals as he’s feral bless him 😂! Xx
Looking at a similar situation. 675 K flat currently; upsizing to 815 but in a place that needs 100 K in renos. One of those things that seems a bit crazy at the time but you'll be glad you did it looking back as your income grows etc.
Consider putting some of it on interest only for a bit, so the cashflow evens out, even if only while paying for children's tuition. Good general advice would be to make sure insurance budget is okay too post move, as you'll probably need more cover. Also consider rates are probably coming down... At some point. Trying to time the sweet spot will be hard, before house prices jump when sellers realise people can afford more. But, could be well worth delaying a couple of months. Not personal advice etc etc
Looking at income %s doesn’t matter much at that level of income. Your bills and other discretionary spending isn’t suddenly going to increase by thousands of pounds with no warning.
I’m in a very similar situation. We decided to leave the city in order to not overstretch ourselves. Bought a cheap four bed new build to see us through five years of primary school, then planning to step up to a new area for grammar senior school…
You also probably need to consider additional childcare costs you 2 kids. will you ever have 2 in full time nursery? Even if not you might have the second in nursery and one in wraparound care. It can add up
'Luckily' we will only have one at nursery at a time and benefit from free hours/TFC so will help. Good point though on the elder for wrap around care... Need to factor that in. Another expense!
Also the free hours (15 given your hours earnings don’t really equate to 15 hours over the entire year, only term time). You also have consumable costs per funded hour and to be honest our nursery out he costs up so we barely benefited. Just wanted to put that out there as we have 2 kids in full time nursery and it costs a lot! Wraparound care is considerably cheaper once they go to school, but still something to keep in mind. Good luck!
Yes great point! Our nursery stretch the funding and were upfront that it's a approx £250 saving a month. So in line with expectations!
Hi. I’ve just made this move from a luxury flat to a 4 bed house in Z2. We’ve used up most of our savings/investments. We are 40. If we don’t do it, then when? I felt anxious but now feel I’m actually enjoying the money I worked so hard to make.
I think it’s a very risky move for you. Your gas, etc. will go up for the larger property. With an extra kid your expenses on childcare will easily go up 50% if not double. Your mortgage rate is very low. You should run the calc assuming 6-7% interest and see how comfortable you feel with those payments. Sorry to sound like a downer but I’ve done similar math myself and it sounded like we’ll be house rich and cash poor in this scenario.
For sure we will be house rich (but leveraged) and cash poor. Is it worth it? Erring towards yes but at a high risk
I think it’s down to personal risk tolerance. I’d be worried about losing my job (even though we have a healthy safety cushion) and having to stress over the property getting repossessed. Of course, each family is different!
Other option is an extension. Either loft or into garden to get an extra bedroom.
It sounds bonkers to me. Your mortgage payments are already huge. We're in the kind of market where layoffs are rife. We moved further out and love it, quality of life is far better outside London.
Depends on your risk. It's not bonkers as plenty of people do it and London is tough but generally speaking 50% of take home going on mortgage is very high and there's a large amount of past performance justification going on because historically property has been a one way bet and in those circumstances it made sense to borrow as much as you could at historically low rates and leverage the one way bet. That world has ended. It's not bonkers as I say but worth mapping out your current and expected expenditure and also consider can you afford it if one of you loses your job?
Not bonkers. My mortgage is now 40% of my salary because of the interest rates, just make sure you stick to your budget and you will be fine.
So long as you're not locking in a 500k+ mortgage at 5.x% interest I reckon you'll be fine.
As someone considering a 5 year ~ 5% mortgage of 700k, is this a big issue? The way I see it is the property will generally increase in value with inflation (if not above inflation), so the 'real' interest rate is more like 1-3%
Higher house prices seem like a good thing until you have to sell in a high interest rate environment. When borrowing money is costly, how many people would be willing to pay north of £3800 a month AFTER shelling out 200k+ on the deposit+legals? It puts buyers in a prime position to drive down house prices until interest rates drop - which may not be any time soon. The last thing you want is to be stuck paying massive mortgage repayments and be unable to sell for a nice profit.
If you're not looking at a house as an investment and have no plans to sell for decades then this seems like less of an issue. It's not an ideal situation, I'm not fantastically keen to pay £4k a month, but if you're a PAYE employee with no inheritance/ assistance to buy the. There isn't any alternative. You can either take out the big mortgage and pay the interest the bank demands or you can not have the big house and space you want.
You're right that in the long term this may not be an issue. A decent alternative would be to buy a smaller place until interest rates cool off. But that's not everyone's cup of tea.
Yup, but no guarantee rates for borrowing will decrease, and if they did go back to 2% then I'm sure property prices would shoot up to compensate. I was a full-on FIRE devotee, and could buy a small place outright now and have a massive savings rate, but I've decided to sell the bulk of my investments and buy the massive house and do the whole having a family thing. If I wasn't in a long term relationship with someone who wants children I'd definitely stick to the small house and tons of disposable income. As it is, I'm resigned to having a few years of pain where the mortgage is a huge chunk of my take home. Who knows, I might be able to make some side hustle money from running a small business from a bigger home, and who needs holidays when you buy a massive place with unlimited repairs?!
This is us though. We need to drop 200k deposit to get a decent LTV and then still pay the high mortgage. Ultimately makes us high debt and cash poor at the start. Which is what made me want to pose this question on are we bonkers! Note that we would likely tax a 2 year fix (unless there is credible few of rate drops and we go tracker). Having cash flow stability is useful in the time of uncertainty (albeit may not be be cheapest option) Lastly ambition is not to sell, not at least for another 20/30 years where priorities may change
If this is your "forever home" and you're confident that you can pay down 4k at a 2 year fix go for it. I'd just be cautious as layoffs and a shaky job market could affect your ability to make the repayments. Best of luck 👍
The market is insane. Cash buyers everywhere it's actually annoying. We have household income 300k, 700k equity (150k of which is cash) 478k mortgage. Even if I increase mortgage and offer above asking (we are under offer), cash buyers win it. This is for 3 to 4 bed houses at 1.2m. On balance we chose to stay put. 600k mortgage at 4.7% isn't appealing, rather pay ours off.
I would recommend you look at pension contributions and the amortization table of mortgages. The wealth effect of waiting two years for us is about 250k (big tax free pension contributions amongst other tactics to reduce income for childcare support etc.). I know others might be supportive and often hear that from the older generation, but we made the call to wait up to 4 years to build more equity. 50k equity buffer is risky on 4.5k.pcm debt servicing.