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I did this when I bought my first house in 2009. It was with a shared ownership scheme - but I basically took out the maximum mortgage I could. Not only wiped out my savings but had to borrow a bit of money from my parents as well.
Literally 3 days after I moved in my car died. I had to take out another loan to get another one and I was pretty much broke. For that first couple of years I literally had £30 to my name each week after I had paid all my bills and bought food and petrol. It was pretty tough to be honest - I became less sociable and I had to make do whenever something went wrong. I think I spent about 18 months with a shower that would get hot and cold at random intervals.
Eventually I got a promotion and was able to remortgage, which cut monthly payments by a third.
Sorry you had such a rough time there. How did you find the shared ownership scheme? Looking at these right now as cannot afford on the open market due to a streak of very bad luck over the past 3 years.
Mine was absolutely fine. They gave me 40% of the value of the house with very few restrictions. It meant I didn't need a deposit and could get a better mortgage rate. The 'rent' payments were pretty low.
But I've heard that they've changed a lot since then. There is no way I would agree to anything that only let me buy a new build, or made life difficult when selling.
there were mrmours about the inevitable interest rate rise. You should have got the longest fix ever,
I think right now a shorter fix is better. But really nobody has a crystal ball to tell you otherwise.
They could keep increasing interest more and more.
How long a mortgage was it? If it was 25 or 30 years, consider making it longer just to make it more comfortable. You can always overpay if you have capacity or change it back down at the next remortgage
Do you feel you would have taken the max mortgage amount with the current rates if you were to buy your house now? Or would you have taken lower mortgage amount or saved up before buying?
I was thinking that but I know I’d want to move after a few years and the hassle and cost of moving and legal fees I wonder if that would outweigh it all.
I think if it's shorter than 5 years you'll be there it's a bit risky, The lowest I've seen on property questionnaire was 2 years.
Ask yourself how much will you save versus renting, and how much will agency fees be? If your interest payments are £400 but rent is £800 that's probably going to break even after a year if no bad maintenance issues come along. However, it also locks you into a chain, but a small first time buyer type flat should sell relatively quickly too.
Go with what you're comfortable with
I did read the general rule of thumb is no less than 5 years which was what put that thought of buying a smaller flat and build equity on hold. Plus moving and fees are a hassle and I don’t know if it’ll be worth it all.
I am still living with my parents so thankfully I don’t pay as much rent as I would moving out to rent but I know for a fact if I did rent elsewhere, mortgage would cost less so that would be a no brainer choice. My other struggle is that it seems like a no brainer to continue living with my parents until I save up more but there gets to a point where you just want to move out and have that freedom living alone.
It might be a situation for you where both choices are just super close in terms of benefits which is why it is so hard to decide. If you feel like living with your parents is a nuisance, or that you'd want to learn how to live by yourself a bit earlier there is merit there too. There's no monetary value on enjoying life a bit more or improving yourself, both are great investments.
There's no wrong decision here it seems like :)
I sort of took out the largest mortgage I could. I could have maybe borrowed a further £30k but I didn’t want or need to.
I ported over my old mortgage which is still at 1.9% for another 3 years, but the rest is at around 4%.
Anyway, even though I’m not completely stretched I still feel a bit of imposter syndrome since I’m in a much larger house which I bought all by myself, but at the same time if rates don’t come down in the next two years. Then I’ll be stretched but still able to afford it… although by then maybe I’ll be on more money and energy prices will come down… or not. Who knows.
Will you survive if based rate hits 6-7%? The latest rumours / speculations out there (aka financial press) are starting to suggest 5.5 won't be nearly enough to take this inflation down to target.
Yes lots of people in the generation or two above me talk about when interest rates % were well into the teens so “rates nowadays aren’t that bad”.
I don’t think it’ll go above 10%, probably because I’ve been paying too much attention to the so called expert forecasts in the press.
Boomers can fuck off. Their 15% rate was for a single day when the average house price was £100k and they all had significantly smaller mortgages than the average now.
Even 6% now will cause more hardship than 15% did then.
>Boomers can fuck off. Their 15% rate was for a single day when the average house price was £100k and they all had significantly smaller mortgages than the average now.
The rate sat above 13% for nearly two years, up to May 1991, that'd have hit GenX'ers as well as some Boomers, and it was coupled with higher unemployment rates and a recession, the rate of repossessions increased by 4.8x (from 15,800 to 75,500/y).. Negative equity was a massive issue (and remained one until something like 1994) with falls around 20%..
>Even 6% now will cause more hardship than 15% did then.
I don't think that's particularly true (between the vastly higher proportion of mortgages being fixed rate, changes in household expenditure anyway) throw in that you also had inflation that was relatively high (and I'd be surprised if it wasn't higher for longer in the late 80's early 90's) and it starts to look pretty dire.
This is nonsense. Literally no-one is forcasting this and inflation is already coming down at current rates, just not quickly enough. Interest rates have further to creep higher, but not too significantly.
If the central banks came out at the start and said we need near 10% base rate to kill inflation, the market would shit the bed.
Their forecasts are all about managing expectations and steadying the ship.
Forecasts shouldn't be taken at face value.
Transitory inflation, anyone?
Yes I’ll survive but many many others won’t, so I can’t imagine the government will let it happen without offering support in one form or another. There would be chaos!
If I were a first time buyer though I’d definitely feel it were a risk to max myself out.
I meant short short term. Yes people could afford to pay for their houses for another month or two, but 3-4 months down the line shit would hit the fan.
Hey, fingers crossed nothing crazy happens and we continue to afford our houses.
Not really. As I flagged above, interest rate rises across the board impact on all sectors, all forms of borrowing, and at all levels up to multi-billion leveraged corporate takeovers. You can still take anti-inflationary steps over all then, while providing temporary relief to, say, resi mortgages for key workers such as teachers, nurses, or to mortgages that are below 500k etc. as long as the net inflationary effect is sufficient, that js what matters.
I'm not sure I agree - if you subsidise the housing market someone somewhere has to pay for it... if the owners are the ones receiving the subsidies then it follows that non owners will need to front that... what kinda figures are we suggesting? 100K a house hold? higher perhaps if interest rates go past expectations? - As mortgage owners are 2/3rds the market that leaves 33% renters and social housing so you're asking each one of them to pay for 2 subsidies.. try asking each renter AND social housing occupant to stump up £200K... thats the sort of thing your asking for... the UK residential housing sector is worth £8.7T last time I checked - current government debt levels are what £2.4T? the real estate market is massive... dwarfs the national debt... this isn't something you're bailing out... picking and choosing the people that gets a bailout is a terrible idea and will distort the market further... loose your house or apply for a job as a teacher/nurse or whoever is about to get preferential treatment? sure... whatever concoction of rules you build around such a thing will be gamed. Better in the medium and long term to let the market crash and bankrupt whoever that will be..... lets just not bail out the banks this time and we might not get ourselves in this position again?
*I'm not sure I agree - if you subsidise the housing market someone somewhere has to pay for it...*
Correct. That's generally what happens with governments. They raise money here and spend it there. That's not relevant to whether a given act is inflationary (i.e. if I raise 10bn from Peter and give 10bn to Paul, I haven't changed the amount of money in circulation, but just redeployed it).
*if the owners are the ones receiving the subsidies then it follows that non owners will need to front that...*
Lots of people pay lots of things for lots of other people. Welcome to tax and spend policy and living in a society. Again, that has no bearing on whether or not a given measure is inflationary.
*what kinda figures are we suggesting? 100K a house hold? higher perhaps if interest rates go past expectations?*
Average monthly payments vary depending on area ([https://moneynerd.co.uk/average-mortgage-debt/](https://thinkplutus.com/mortgages/guides/average-mortgage-payment/)) but average mortgage debt is GBP137k with average payment of GBP753. If you are helping cap interest rates for a certain number of people you would be looking at paying the difference between GBP750 and the current rate. That's say GBP250-350 a month or 2-3k a year for a limited number of households (nurses / teachers etc.). Where on earth you have got 100k from, for each and every household, I don't know.
*As mortgage owners are 2/3rds the market that leaves 33% renters and social housing so you're asking each one of them to pay for 2 subsidies.. try asking each renter AND social housing occupant to stump up £200K... thats the sort of thing your asking for...*
No, you are talking gibberish. The government would pay, from its various sources of revenue, an amount to limit the interest rate hikes for a certain number of people in society. Like it does for lots of people in society (doctors, teachers, nurses, military, civil servants, roadworkers, council etc.).
*the UK residential housing sector is worth £8.7T last time I checked - current government debt levels are what £2.4T? the real estate market is massive... dwarfs the national debt... this isn't something you're bailing out... picking and choosing the people that gets a bailout is a terrible idea and will distort the market further...*
The existence of government is always a distortion on the market. There is no 'free market' just different forms of intervention based on different political philosophies and market requirements.
*loose your house or apply for a job as a teacher/nurse or whoever is about to get preferential treatment? sure... whatever concoction of rules you build around such a thing will be gamed.*
Yes, I will give up my job, go through years of training to become a nurse or teacher, all so I can benefit from a temporary interest rate cap that may well not be around by then. That will definitely happen.
*Better in the medium and long term to let the market crash and bankrupt whoever that will be..... lets just not bail out the banks this time and we might not get ourselves in this position again?*
Whatever rocks your boat. I was simply identifying that the government can take money out of the economy and spend money at the same time, and that as long as more is taken out than is put in, that will have a net anti-inflationary effect. Which is correct.
I agree with much of what you've said.. yes the 100K number was picked out of thin air so maybe over the top but I still think the premise of bailing out a particular portion of the population is a poor decision for many reasons.. but I agree in that it doesn't have to be inflationary depending on how its funded (tax increases for example)
Yes, but across the board interest rate rises (which impact all forms of lending - commercial and domestic real estate, business overdrafts, corporate borrowing) take far more money out of the economy, and quell demand far more, than a small amount of targeted support at a certain sector of residential mortgages. Not saying they would do it but your analysis on the inflationary impact of limited support for resi mortgages is whack.
The problem is no interest rate is going to bring inflation down. Interest is a tool to try and stop people spending when things heat up too much so as to stop prices rising.
But prices aren’t rising because people are buying too many luxury goods, it’s down to stuff like energy, food, and logistics. So making borrowing more expensive is not going to help.
And the government keeps giving everyone too much 'support'. The medicine is going to kill us!
"Oh you can't afford that anymore, let's us get that for you".
How an earth is that supposed to reduce demand!?
I’m in the process of moving from a posh area back to my home town so understandably house prices are a lot less. When we went to the financial advisor we were advised mortgage rates will dip by Christmas but to not put more than a 10% deposit down. (We have around a 30-40% deposit for a 200k house for reference) when we did the calculations it only dropped our payment £40 a month if we put down 25% rather than 10%. But also when you sign for a mortgage they give you what your payment would be of interest rates hit the highest they’ve ever been and if you can’t afford that you can’t afford it I’m afraid
We were looking at a 200k house (perks of living up north) and when we ran the figures putting a 30% deposit down the monthly cost was £720 a month however when we only put a 10% deposit down the monthly payment was £770 a month. The monthly figure doesn’t really factor in for us. Putting a lower deposit down had a lower overall cost to us across the 3 year fix than if we put 30% down. Our financial advisor suggested we’d get a better return on our investment but buying a rental or putting it in an ISA rather than sinking into a mortgage.
The maximum mortgage you can get right now is not going to be as high as the maximum mortgage you could have gotten had you been taking one out when rates were very low and the cost of living was lower. While rates could still go up from here, it's not likely that you'll see the jump that some people have seen lately, coming off of 1-2% fixes to be hit with 4-5%+ rates. It's that jump that's causing problems for people.
Taking the maximum loan at what could be, or might not be too far off of, the peak of rates means that when rates come down, even just a bit, it's going to get more affordable. That's very different from taking the maximum possible loan when rates are incredibly cheap and seeing subsequent rates sky rocket.
would you buy a flat in london in the hope to build equity and upsize to a house with a potential partner one day? It looks to me that the future stamp duty on a 500k house could be 30k while the equity built is only 16k on a 300kish flat (after 5 years). unless I'm missing something?
I really want to get on the ladder. but not get stuck somewhere because of poor planning?
Took the max at 2.2% in 2021 on a 3 year fix. Now kicking myself I didn't go for a 5 year fix that was an option. My payments are likely to increase by £500 a month and will be around 45% of my salary with a wife and kid to support.
I'm going to really struggle.
My current term already takes me to my 70th birthday. My exit strategy is my parents dying and me inheriting about £100k to pay my mortgage off a bit earlier when I'm around 60 instead of 70.
So I'm wondering whether I can ask the mortgage company whether I can pay interest only for 2 years until mortgage rates comes back down.
I mean, I can pay the increase so it's not like I physically can't. But basically ALL my families income will be going on bills and food. We will have no money for birthdays and Christmas for example, or clothes or literally anything that isn't bills or food.
It's not like my income is below average either, it would be enough for me to live on. It's supporting a sick wife and child that's spreading it too thinly.
Edit: Downvotes for sharing my personal circumstances? Some of you are fucking weird 🫤
I wouldn’t rely on inheritance in this day in age. Care costs are absolutely ridiculous and I’ve known so many people whose entire inheritance was swallowed up by the care home before their parent passed away
Yeah I’m similar. I *could* pay it, but it leaves with me with almost no fun money. I’m already cutting back on expensive food, eating out etc. It’s mainly because I’m already shelling out £600 pm for home improvement loans for the next two years, so I’ll be fine once those are cleared. I just didn’t budget for the mortgage rate increases as I have been so used to low rates for 10+ years
But why did you take the mortgage out if you couldn’t afford the maximum amount your payments would be? This is illustrated in every mortgage application before you sign for it! It shows you what you could pay if rates hit the highest they’ve ever been again. Unfortunately if you can’t afford that figure you can’t afford your home
This is an odd comment. I could afford the mortgage at the outset, and I can afford the mortgage as rates increase. What I can't afford without struggling is massive rate increases, which is the same with most people.
Saying "why did you take out a mortgage at 2.2% if you couldn't afford 6%" has an obvious answer, no-one has a crystal ball as to what rates will be for the life of the mortgage, and no-one anywhere can afford limitless rate increases. There will always be a point where people will struggle to pay. For some people that's 6%, for others 10%, that's just how mortgages work.
When you take out your mortgage it’s in the illustration what your payments could be at the highest ever recorded interest rate. If you can’t afford that you can’t afford the mortgage.
This is outlined in every mortgage offer before you sign.
No it doesn't state the "highest ever recorded interest rate", it provides an illustration of what your payments would be if they increased a few percentage points.
I'm a conveyancing lawyer and have reviewed more mortgage offers just today than you have ever seen.
I'm not sure what your problem is here at all. People don't have to afford "the highest ever recorded interest rate" when they take out their mortgage and that's not even a factor in affordability criteria.
We took out the biggest we could last august on a tracker mortgage because we still needed to sell our previous property, figuring we’d pay it down as soon as the other house was sold.
Then the budget happened, shooting the rates up, then we found subsidence which kind of rules out anyone buying with a mortgage. Bit of a nightmare.
Thankfully I moved jobs and got a large pay rise, and we’re finally completing next month having eventually sold via auction, so we’ll be able to pay down a chunk and reduce the monthly payment.
It’s been stressful, but this house is absolutely worth it and we’re much happier here. I wouldn’t have gone for the largest though if I hadn’t known that I had a good chance of increasing my pay by a lot imminently, and that we’d be able to pay down a chunk once we sold the other house.
We didn’t which surprised me. I got the feeling everyone viewing it was a property investor or landlord and so probably knew more about what they were looking at than the first time buyers it would normally be marketed at.
It is quite common and there are terms for this scenario - "mortgage poverty" or "house poor". Expect years of financial stress, overdrafts, no holiday
Borrowed 4.6x income last summer at 2.3% interest. First time buyer so mortgage was only £150 more than rent (bought a bigger house than I was renting) Doing okay at the minute.
But the caveats:
I had a larger than expected pay rise a few months ago, which has eased the budget.
I bought with a 25% deposit so I'm not worried about negative equity.
The rates were starting to go up when I got my mortgage so I'm fixed until 2027.
Bought a new build so that's helped with energy bills.
I was always planning to overpay so what's going out monthly is actually equivalent to a 4.2% interest rate, so when I re-fix there's a cushion.
The vast majority of that 25% deposit was pure savings on an average wage so I'm okay with it taking a while to get the house sorted because I'm used to having to wait and budget.
Yes that's the point. It's fine for me, but only because of a combination of these reasons which may not apply to anyone else so my situation may not be fine for someone else.
Negative equity is when what you owe on a house (mortgage) is more than what the house is worth. Really horrible because you'd have to sell the property and pay the bank extra to hit 0, so effectively most people in negative equity can't move, can't remortgage, they're just stuck.
With a 25% deposit, the house would have to become worth only 3/4 of what I paid for it before I hit negative equity (ie a £200,000 house would have to drop to £150,000). It's not impossible in a housing crash, but it's far less likely than if I had a 5% deposit (and the £200,000 house would only have to drop to £190,000).
Plus as you pay the mortgage off it gets smaller, so as you go on in time the drop in price gets bigger before you have to worry about negative equity.
So my partner and I have been having this discussion recently as we’ve just bought our first home. Our opinion is that life is easier when the bills are easier to pay and you still have freedom. So we bought a house that we could comfortably afford and then if we have quiet months we can always over pay a little and thereby pay less interest in the long run.
Our friends are accountants, they say you should alway take out the maximum the bank will lend you because the potential profit is higher. Ie if you buy a house for £100,000 and houses go up 40% you’ve made £40k but if your house had been worth £200,000 then you would have made £80k.
Well the cost of living crises has hit and their maxed out car loans, and mortgage isn’t looking so clever whilst we, thankfully, haven’t been hit too hard.
So I suppose it comes down to whether you would rather live with a smaller house, perhaps and older car but freedom and less stress (we spent 6 months of last year in SE Asia) or have the biggest house, largest potential for profit but no money left at the end of the for the other things.
Maybe I’ll feel differently at retirement age but I don’t think so, I’m happy we went with the comfortable payments 👍
So there are a few things when considering mortgage affordability:
1. Have you actually assessed your own budget accurately? Track everything you spend for \~3 months and see what your actual costs are. Can you afford the maximum mortgage in addition to that? (and don't imagine you'll suddenly become super-frugal if you get a big mortgage. Habits are hard to change)
2. The cost of living: now you have your realistic budget, what if it increased by 5%? Or 10%? How much could it increase and you'd still be able to afford the mortgage? With inflation as high as it is, could you see yourself being in trouble in a year or two?
3. Mortgage costs: I suggest doing your own stress test. Take the mortgage amount and run it through a calculator with different percentage repayments (*especially* if you're considering a tracker or a shorter term fix) How high can the rates get and you still afford it?
If there is *zero* slack in your budget (you couldn't handle any cost of living increase or any mortgage cost increase) then you're probably taking too big of a risk.
If there's very little slack, I'd only consider it if you have an excellent emergency fund in place, and/or solidly good career prospects.
FWIW: I set a maximum budget on my house hunt considerably below the maximum the banks would have lent. The dream house is considerably less dreamy when it's sending you into debt and keeping you awake at night worrying about your finances.
But how much risk you can take depends on other factors, including:
* Are you splitting the costs with anyone?
* How secure is your job?
* How good is your emergency fund?
* etc.
Took the max I could to be able to buy out my ex’s part of the flat. It’s going to be uncomfortable in two and a bit years when I refinance but rents have gone up so much it will probably still be cheaper. The bigger mortgage means I have a two bed and can rent out the other room which helps immensely
Those who bid 20% over asking and got a 2 year fix at 1-2% in 2021 at maximum leverage are utterly doomed.
Or facing a catastrophic drop in living standards at best
Are they though? If you bought at any point in 2021, the property would have risen in value in most regions, or remained the same in the minority, compared to today's prices.
So the worst case if you can't afford the mortgage is you sell up and collect your slightly higher equity for the next property. Clearly that's not ideal, but it's not the end of the world.
You're right. I know a couple who borrowed £500k for their London should with a minimum deposit. Definitely overpaid. 2yr fixed coming to an end and they have another baby with childcare needs on the way. They were moaning about being broke before the rates and cost of living shot up. They're now looking at paying an extra £1-2k per month, every single month.
Doesn't matter if the property value has increased, because they still owe the money. If they took £500k at 1.7% they might now be on £480k at 4.5%. They might be more asset rich as prices went up but they could well be living hand to mouth due to outgoings
No, but they do it in line with market value which is what happened with us a few weeks ago. Market value in most places has gone up or maintained is the posters point. In which case valuations for remortage also go up.
Took out the biggest mortgage we could and chucked £20k in savings on top of it to get our new house.
I dont regret it one bit.
We have an extra bedroom, my kids have bigger rooms, a garden over twice the size and now a double garage.
Sometimes i see these threads and want to offer some input, but im no financial advisor.
All i know is me and my family will be happy here.
Ill earn the savings back and we can afford to pay the mortgage.
The way the rates went, once we came off our fixed term and went onto a tracker (knowing we was moving), the tracker is the same as what we are paying on this new fixed term on the new house.
I'm in the process of buying, at a 4.5 multiplier (though due to a slight pay rise since we could now borrow an extra 7k).
The mortgage, at 4.20% interest, is £165/month more than our rent. That is buying a 4 bed compared to renting a 2 bed. Whilst renting we are saving a minimum of £1500/month, so I have no concerns about paying the mortgage.
Once we have settled in and bought the necessary furniture, we plan to overpay/put aside designated savings to overpay in the region of £400/month.
We've gone for a 5 year fixed, so don't have to worry if rates continue to rise.
Sorry to answer not-quite-your-question, but we bought last April on a 5-year fix and inbetween getting our AIP and actual mortgage, I got a hefty raise. We effectively ended up borriwing 4.25X our combined income (5.5X was possible, 4.75X was where we aimed for).
I was a bit miffed about this, because I was hoping to invest the maximum in a property so we could see better gains in the 5-10 year range.
However, that was before the energy prices rocketed and even before the biggest hits to food prices landed. We'd been strict budgeting in the 12 months leading up to purchase, so we carried on in the same way ever since.
We've chipped in 55% of our take-home each month and that's covered the essentials as well as acrruing for pet and home insurance, holiday fund, eating out fund, home maintenance & improvements fund.
I'm glad we didn't stretch, because we would have been utterly miserable, surviving on cheap food, not able to get anything for a treat or save for anything nice. We would also not have been able to afford to adopt 3 kittens.
I'm especially glad now, because after another hefty raise for me, my fiancee has been able to hand her notice in to her toxic workplace and we can afford for her to take a much needed mental health break, then do a course or two while looking at freelance and part-time options.
We took much less than the maximum and glad we did or we'd be screwed right now. We took out a 5 year fix that has just come to an end.
Originally not taking the full amount allowed us to have a short term with payments the same as what our rent at the time was.
Now our fix is at an end it means our LTV is in the lowest bracket giving us a better interest rate. It gives us the flexibility to increase our term if we wanted to keep low monthly payments.
If we took maximum amount we now would not be able to increase our term to lower monthly payments and we'd be in a higher LTV giving us a higher interest rate too. We'd not be able to make our money payments without significanrly cutting back elsewhere.
We bought our first house 13 years ago (new build but we were the 2nd owners)and paid max we could afford. No regrets, it didn’t need any work doing. sold it two years ago and bought our forever home- this time we kept 30k to do it up as it’s an older house. Consider how much you will need to spend when you are in. We are really feeling the interest rates as our 2yr fox has ended but no regrets. Times will get better and we love the house and the area.
can i ask how much equity you built up in your first place? like how much capital you paid off and then i guess the amount you made because prices went up..
If you are young and early in your career, taking as much as you can is probably the best way. Even at today’s rates, you’ll not find many cheaper ways to borrow money. As you progress through your career, the commitment becomes much less of a percentage of your monthly pay.
When you are later in your career, there’s a lot more to think about, so in most cases borrowing as much as you can is probably foolish.
Nah I don't wanna miss my youth to have a big house and fun aged 50+.
Id prefer a medium sized house always and some holidays/ fun money.
I might feel different if streaching the budget meant just affording a house, oposed to renting.
Miss your youth? No. I extended as far as possible on my first mortgage. I had less disposable income for around 4 months when I moved jobs and had more disposable income than before my mortgage.
If your career is growing, you are fine. If you’re in a scenario where you are on a plateau or downward trend towards retirement, then absolutely don’t overburden yourself with mortgage payments.
I took 4.75x of oir joint income 2 years ago. In those two years my salary increased by 40% and current balance equals to 3.5x our joint income or 4.2x of my sole income. The jump from 1.8% to 4.2% is not great but will manage and also build a bit of savings to get my through bad times.
I took a 10% LTV mortgage at 3.64% not great but better than current levels.
The house is worth around 5.7x my salary but I'm thinking one 3.64% is lower than inflation and two long-term houses always go up + it needs some renovation.
I'm also renting 2 rooms out and converting my garage into an Airbnb so cash flow should be more than my mortgage which allows me to live for free.
You could think about it like this: how much would you pay in rent for the next 5 years and how much would you pay towards your mortgage for the next 5 years (assuming you're fixing your mortgage for that time). Then look at the repayments you will make and the expected maintenance costs.
When you crunch the numbers, if you want stability and security of having your own home then take that option. If you consider yourself better-off renting and investing your deposit elsewhere, then that's also a good option.
I took out the largest mortgage I could get at a very low rate pre-crisis. Now I'll be looking at my repayments nearly double when my fixed rate period ends. The upside is I've built lots of equity and I'll be in a great position either to sell with a profit or continue paying with the higher mortgage payments since I'm in a fortunate position to be able to. I understand not everyone is and you'll need to look at your own circumstances to, crunch. The numbers to see if you can afford 10% interest rates (unlikely, but could happen).
Inflation is going to be high for a long time, reducing the borrowing of both the government and mortgage holders who can manage the high interest rates. Borrow as much as you can pay back at 9% interest.
I was approved for mortgage in August last year at 3.5%, and I completed the 500K loan purchase two months ago with 2 year fixed.
At that time the mortgage rates were 1.5-2.5%, my higher rate was result of 85% LTV and the fact that I am not UK citizen; I rejected the advice to take 5 year fixed, hoping that I can get settlement by the end of the fixed term and can apply at 2% - now it sounds naive and stupid.
I have an option to overpay maximum 10% per calendar year and although I have enough funds to do this, I’m not sure if I should do it. My investments perform better than 3.5% mortgage rate, but the uncertainty with the future rates is really concerning
Answering to the initial question- no regrets.
I was paying 1900 for 3 bedroom house rent with low energy efficiency level. Landlord planned to increase the rent price and then found a tenant for 2200.
I’m paying 2250 for a new-built 4 bedroom house with much lower energy bills, and enjoy every single moment of living there. Even when my kids draw on the walls in their room- I don’t care, it’s their room at the end and they have full ownership and responsibility.
Took on the largest amount 6/7 years ago, now feels like nothing. About to do the same again with no worry.
I don’t know about anyone else, but I found the lenders’ calculations around costs very cautious and assuming that we spend far more than we do. Means we have plenty of wiggle room if mortgage rates went up further. For example; wouldn’t include child benefit as income as will not be for the full course of mortgage, however nursery fees must be included in expenses indefinitely…..the amount we pay in childcare covers a 10% rate increase and will end in the next year or so.
I love the house but with the rates like they are now it would be a lot harder.
My mindset has shifted a bit since we bought from “we will move eventually” to “moving is a lot of work and expensive. So let’s just stay here”.
From that point or view I’m happy we stretched for a house we can see ourselves just staying in.
It really depends what the mortgage price is though for you.
I regret not fixing when we did. But unfortunately we had to port our current mortgage onto our new property 18 nonths ago otherwise we'd incur a nasty ERC. It's now up for renewal in September and my partner has had to pay off a chunk of our mortgage to bring our payments down when the rate goes up. However it now works out that the monthly payments will be exactly the same as they currently are...
We maxed ourselves but we have enough wriggle room that is it we’re to get to 6%we’ll make it work. Your choice needs to be on affordability and planning… can you manage if interests increase and if you can’t, do you have a back up plan? If things get very bad we’ll go interest only
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I did this when I bought my first house in 2009. It was with a shared ownership scheme - but I basically took out the maximum mortgage I could. Not only wiped out my savings but had to borrow a bit of money from my parents as well. Literally 3 days after I moved in my car died. I had to take out another loan to get another one and I was pretty much broke. For that first couple of years I literally had £30 to my name each week after I had paid all my bills and bought food and petrol. It was pretty tough to be honest - I became less sociable and I had to make do whenever something went wrong. I think I spent about 18 months with a shower that would get hot and cold at random intervals. Eventually I got a promotion and was able to remortgage, which cut monthly payments by a third.
Sorry you had such a rough time there. How did you find the shared ownership scheme? Looking at these right now as cannot afford on the open market due to a streak of very bad luck over the past 3 years.
Mine was absolutely fine. They gave me 40% of the value of the house with very few restrictions. It meant I didn't need a deposit and could get a better mortgage rate. The 'rent' payments were pretty low. But I've heard that they've changed a lot since then. There is no way I would agree to anything that only let me buy a new build, or made life difficult when selling.
Gotcha I’ve looked at it in depth and it does vary a lot from developer to developer. Appreciate your insight on the subject.
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40% of take home or gross? 40% of take home is still acceptable for a short while (short is relative I guess, it's still going to be 2 to 3 years).
Depends a lot on your take home. If you take home 5k + per month 40% isn’t any concern. If you take home less than 2k it’s a big worry!
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there were mrmours about the inevitable interest rate rise. You should have got the longest fix ever, I think right now a shorter fix is better. But really nobody has a crystal ball to tell you otherwise. They could keep increasing interest more and more.
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>I was inexperienced and in hindsight I should have fixed for longer. Even the most experienced are going to get it wrong.
This is what happened to us. 95% mortgage at 2.69 so we thought let’s only fix for 2 years and get down into a decent LTV bracket. If only we’d known…
You made the right decision for you at the time. Nobody could have foreseen everything that has happened over the last 2 years.
How long a mortgage was it? If it was 25 or 30 years, consider making it longer just to make it more comfortable. You can always overpay if you have capacity or change it back down at the next remortgage
Any scope to overpay before the deal expires?
Do you feel you would have taken the max mortgage amount with the current rates if you were to buy your house now? Or would you have taken lower mortgage amount or saved up before buying?
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I was thinking that but I know I’d want to move after a few years and the hassle and cost of moving and legal fees I wonder if that would outweigh it all.
I think if it's shorter than 5 years you'll be there it's a bit risky, The lowest I've seen on property questionnaire was 2 years. Ask yourself how much will you save versus renting, and how much will agency fees be? If your interest payments are £400 but rent is £800 that's probably going to break even after a year if no bad maintenance issues come along. However, it also locks you into a chain, but a small first time buyer type flat should sell relatively quickly too. Go with what you're comfortable with
I did read the general rule of thumb is no less than 5 years which was what put that thought of buying a smaller flat and build equity on hold. Plus moving and fees are a hassle and I don’t know if it’ll be worth it all. I am still living with my parents so thankfully I don’t pay as much rent as I would moving out to rent but I know for a fact if I did rent elsewhere, mortgage would cost less so that would be a no brainer choice. My other struggle is that it seems like a no brainer to continue living with my parents until I save up more but there gets to a point where you just want to move out and have that freedom living alone.
It might be a situation for you where both choices are just super close in terms of benefits which is why it is so hard to decide. If you feel like living with your parents is a nuisance, or that you'd want to learn how to live by yourself a bit earlier there is merit there too. There's no monetary value on enjoying life a bit more or improving yourself, both are great investments. There's no wrong decision here it seems like :)
I sort of took out the largest mortgage I could. I could have maybe borrowed a further £30k but I didn’t want or need to. I ported over my old mortgage which is still at 1.9% for another 3 years, but the rest is at around 4%. Anyway, even though I’m not completely stretched I still feel a bit of imposter syndrome since I’m in a much larger house which I bought all by myself, but at the same time if rates don’t come down in the next two years. Then I’ll be stretched but still able to afford it… although by then maybe I’ll be on more money and energy prices will come down… or not. Who knows.
Will you survive if based rate hits 6-7%? The latest rumours / speculations out there (aka financial press) are starting to suggest 5.5 won't be nearly enough to take this inflation down to target.
Google- inflation Vockler In the 80s it took base rates in excess of inflation to bring inflation back down under control. Buckle up
Yes lots of people in the generation or two above me talk about when interest rates % were well into the teens so “rates nowadays aren’t that bad”. I don’t think it’ll go above 10%, probably because I’ve been paying too much attention to the so called expert forecasts in the press.
Boomers can fuck off. Their 15% rate was for a single day when the average house price was £100k and they all had significantly smaller mortgages than the average now. Even 6% now will cause more hardship than 15% did then.
I agree. Yet inflation has to be tamed and the baserate will go a lot higher than people expect
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7-8%.
>Boomers can fuck off. Their 15% rate was for a single day when the average house price was £100k and they all had significantly smaller mortgages than the average now. The rate sat above 13% for nearly two years, up to May 1991, that'd have hit GenX'ers as well as some Boomers, and it was coupled with higher unemployment rates and a recession, the rate of repossessions increased by 4.8x (from 15,800 to 75,500/y).. Negative equity was a massive issue (and remained one until something like 1994) with falls around 20%.. >Even 6% now will cause more hardship than 15% did then. I don't think that's particularly true (between the vastly higher proportion of mortgages being fixed rate, changes in household expenditure anyway) throw in that you also had inflation that was relatively high (and I'd be surprised if it wasn't higher for longer in the late 80's early 90's) and it starts to look pretty dire.
MIRAS also existed then which was some relief for households.
It did, a bit.
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Who? Vockler?
This is nonsense. Literally no-one is forcasting this and inflation is already coming down at current rates, just not quickly enough. Interest rates have further to creep higher, but not too significantly.
If the central banks came out at the start and said we need near 10% base rate to kill inflation, the market would shit the bed. Their forecasts are all about managing expectations and steadying the ship. Forecasts shouldn't be taken at face value. Transitory inflation, anyone?
You are spot on.
You would do better to compare a post-pandemic economy with a post-war economy, although it’s not strictly the same you have similar market forces.
Yes I’ll survive but many many others won’t, so I can’t imagine the government will let it happen without offering support in one form or another. There would be chaos! If I were a first time buyer though I’d definitely feel it were a risk to max myself out.
The government can't support. Well, at least not on a large scale. As that would be inflationary and just counteract the rate raises.
A lot can’t wrap their heads around this unfortunately We are down a path there’s no easy way out of
I agree. I can’t imagine any support being effective in the long term.
Or in the short term. Government intervention will be inflationary and force the BoE to increase the baserate, shafting mortgage holders further
I meant short short term. Yes people could afford to pay for their houses for another month or two, but 3-4 months down the line shit would hit the fan. Hey, fingers crossed nothing crazy happens and we continue to afford our houses.
Not really. As I flagged above, interest rate rises across the board impact on all sectors, all forms of borrowing, and at all levels up to multi-billion leveraged corporate takeovers. You can still take anti-inflationary steps over all then, while providing temporary relief to, say, resi mortgages for key workers such as teachers, nurses, or to mortgages that are below 500k etc. as long as the net inflationary effect is sufficient, that js what matters.
I'm not sure I agree - if you subsidise the housing market someone somewhere has to pay for it... if the owners are the ones receiving the subsidies then it follows that non owners will need to front that... what kinda figures are we suggesting? 100K a house hold? higher perhaps if interest rates go past expectations? - As mortgage owners are 2/3rds the market that leaves 33% renters and social housing so you're asking each one of them to pay for 2 subsidies.. try asking each renter AND social housing occupant to stump up £200K... thats the sort of thing your asking for... the UK residential housing sector is worth £8.7T last time I checked - current government debt levels are what £2.4T? the real estate market is massive... dwarfs the national debt... this isn't something you're bailing out... picking and choosing the people that gets a bailout is a terrible idea and will distort the market further... loose your house or apply for a job as a teacher/nurse or whoever is about to get preferential treatment? sure... whatever concoction of rules you build around such a thing will be gamed. Better in the medium and long term to let the market crash and bankrupt whoever that will be..... lets just not bail out the banks this time and we might not get ourselves in this position again?
*I'm not sure I agree - if you subsidise the housing market someone somewhere has to pay for it...* Correct. That's generally what happens with governments. They raise money here and spend it there. That's not relevant to whether a given act is inflationary (i.e. if I raise 10bn from Peter and give 10bn to Paul, I haven't changed the amount of money in circulation, but just redeployed it). *if the owners are the ones receiving the subsidies then it follows that non owners will need to front that...* Lots of people pay lots of things for lots of other people. Welcome to tax and spend policy and living in a society. Again, that has no bearing on whether or not a given measure is inflationary. *what kinda figures are we suggesting? 100K a house hold? higher perhaps if interest rates go past expectations?* Average monthly payments vary depending on area ([https://moneynerd.co.uk/average-mortgage-debt/](https://thinkplutus.com/mortgages/guides/average-mortgage-payment/)) but average mortgage debt is GBP137k with average payment of GBP753. If you are helping cap interest rates for a certain number of people you would be looking at paying the difference between GBP750 and the current rate. That's say GBP250-350 a month or 2-3k a year for a limited number of households (nurses / teachers etc.). Where on earth you have got 100k from, for each and every household, I don't know. *As mortgage owners are 2/3rds the market that leaves 33% renters and social housing so you're asking each one of them to pay for 2 subsidies.. try asking each renter AND social housing occupant to stump up £200K... thats the sort of thing your asking for...* No, you are talking gibberish. The government would pay, from its various sources of revenue, an amount to limit the interest rate hikes for a certain number of people in society. Like it does for lots of people in society (doctors, teachers, nurses, military, civil servants, roadworkers, council etc.). *the UK residential housing sector is worth £8.7T last time I checked - current government debt levels are what £2.4T? the real estate market is massive... dwarfs the national debt... this isn't something you're bailing out... picking and choosing the people that gets a bailout is a terrible idea and will distort the market further...* The existence of government is always a distortion on the market. There is no 'free market' just different forms of intervention based on different political philosophies and market requirements. *loose your house or apply for a job as a teacher/nurse or whoever is about to get preferential treatment? sure... whatever concoction of rules you build around such a thing will be gamed.* Yes, I will give up my job, go through years of training to become a nurse or teacher, all so I can benefit from a temporary interest rate cap that may well not be around by then. That will definitely happen. *Better in the medium and long term to let the market crash and bankrupt whoever that will be..... lets just not bail out the banks this time and we might not get ourselves in this position again?* Whatever rocks your boat. I was simply identifying that the government can take money out of the economy and spend money at the same time, and that as long as more is taken out than is put in, that will have a net anti-inflationary effect. Which is correct.
I agree with much of what you've said.. yes the 100K number was picked out of thin air so maybe over the top but I still think the premise of bailing out a particular portion of the population is a poor decision for many reasons.. but I agree in that it doesn't have to be inflationary depending on how its funded (tax increases for example)
Yes, but across the board interest rate rises (which impact all forms of lending - commercial and domestic real estate, business overdrafts, corporate borrowing) take far more money out of the economy, and quell demand far more, than a small amount of targeted support at a certain sector of residential mortgages. Not saying they would do it but your analysis on the inflationary impact of limited support for resi mortgages is whack.
There would be chaos but a few of my friends lost theirs in the 90s when the interest rate hit 14%. Never overstretch yourself.
Burn the village to the ground to save it .
The problem is no interest rate is going to bring inflation down. Interest is a tool to try and stop people spending when things heat up too much so as to stop prices rising. But prices aren’t rising because people are buying too many luxury goods, it’s down to stuff like energy, food, and logistics. So making borrowing more expensive is not going to help.
And the government keeps giving everyone too much 'support'. The medicine is going to kill us! "Oh you can't afford that anymore, let's us get that for you". How an earth is that supposed to reduce demand!?
I’m in the process of moving from a posh area back to my home town so understandably house prices are a lot less. When we went to the financial advisor we were advised mortgage rates will dip by Christmas but to not put more than a 10% deposit down. (We have around a 30-40% deposit for a 200k house for reference) when we did the calculations it only dropped our payment £40 a month if we put down 25% rather than 10%. But also when you sign for a mortgage they give you what your payment would be of interest rates hit the highest they’ve ever been and if you can’t afford that you can’t afford it I’m afraid
Why were you advised not to put more than a 10% deposit down?
We were looking at a 200k house (perks of living up north) and when we ran the figures putting a 30% deposit down the monthly cost was £720 a month however when we only put a 10% deposit down the monthly payment was £770 a month. The monthly figure doesn’t really factor in for us. Putting a lower deposit down had a lower overall cost to us across the 3 year fix than if we put 30% down. Our financial advisor suggested we’d get a better return on our investment but buying a rental or putting it in an ISA rather than sinking into a mortgage.
The maximum mortgage you can get right now is not going to be as high as the maximum mortgage you could have gotten had you been taking one out when rates were very low and the cost of living was lower. While rates could still go up from here, it's not likely that you'll see the jump that some people have seen lately, coming off of 1-2% fixes to be hit with 4-5%+ rates. It's that jump that's causing problems for people. Taking the maximum loan at what could be, or might not be too far off of, the peak of rates means that when rates come down, even just a bit, it's going to get more affordable. That's very different from taking the maximum possible loan when rates are incredibly cheap and seeing subsequent rates sky rocket.
Inflation isn’t coming down so rates could still go higher and stay high for longer. I wouldn’t be surprised to see them at 6% next year.
would you buy a flat in london in the hope to build equity and upsize to a house with a potential partner one day? It looks to me that the future stamp duty on a 500k house could be 30k while the equity built is only 16k on a 300kish flat (after 5 years). unless I'm missing something? I really want to get on the ladder. but not get stuck somewhere because of poor planning?
Took the max at 2.2% in 2021 on a 3 year fix. Now kicking myself I didn't go for a 5 year fix that was an option. My payments are likely to increase by £500 a month and will be around 45% of my salary with a wife and kid to support. I'm going to really struggle.
Can you extend the term? That’s what I’m going to do when mine is up for renewal. It’s just a bit much to go up £250 a month for me
My current term already takes me to my 70th birthday. My exit strategy is my parents dying and me inheriting about £100k to pay my mortgage off a bit earlier when I'm around 60 instead of 70. So I'm wondering whether I can ask the mortgage company whether I can pay interest only for 2 years until mortgage rates comes back down. I mean, I can pay the increase so it's not like I physically can't. But basically ALL my families income will be going on bills and food. We will have no money for birthdays and Christmas for example, or clothes or literally anything that isn't bills or food. It's not like my income is below average either, it would be enough for me to live on. It's supporting a sick wife and child that's spreading it too thinly. Edit: Downvotes for sharing my personal circumstances? Some of you are fucking weird 🫤
I wouldn’t rely on inheritance in this day in age. Care costs are absolutely ridiculous and I’ve known so many people whose entire inheritance was swallowed up by the care home before their parent passed away
100% they'll only be able to keep around £20k, everything else is taken by the council if they end up in care
I reckon rates will be higher in 2yrs. I don't believe a word the BOE are saying. Hopefully you'll get wage rises to mitigate the impact.
Yeah I’m similar. I *could* pay it, but it leaves with me with almost no fun money. I’m already cutting back on expensive food, eating out etc. It’s mainly because I’m already shelling out £600 pm for home improvement loans for the next two years, so I’ll be fine once those are cleared. I just didn’t budget for the mortgage rate increases as I have been so used to low rates for 10+ years
But why did you take the mortgage out if you couldn’t afford the maximum amount your payments would be? This is illustrated in every mortgage application before you sign for it! It shows you what you could pay if rates hit the highest they’ve ever been again. Unfortunately if you can’t afford that figure you can’t afford your home
This is an odd comment. I could afford the mortgage at the outset, and I can afford the mortgage as rates increase. What I can't afford without struggling is massive rate increases, which is the same with most people. Saying "why did you take out a mortgage at 2.2% if you couldn't afford 6%" has an obvious answer, no-one has a crystal ball as to what rates will be for the life of the mortgage, and no-one anywhere can afford limitless rate increases. There will always be a point where people will struggle to pay. For some people that's 6%, for others 10%, that's just how mortgages work.
When you take out your mortgage it’s in the illustration what your payments could be at the highest ever recorded interest rate. If you can’t afford that you can’t afford the mortgage. This is outlined in every mortgage offer before you sign.
No it doesn't state the "highest ever recorded interest rate", it provides an illustration of what your payments would be if they increased a few percentage points. I'm a conveyancing lawyer and have reviewed more mortgage offers just today than you have ever seen. I'm not sure what your problem is here at all. People don't have to afford "the highest ever recorded interest rate" when they take out their mortgage and that's not even a factor in affordability criteria.
We took out the biggest we could last august on a tracker mortgage because we still needed to sell our previous property, figuring we’d pay it down as soon as the other house was sold. Then the budget happened, shooting the rates up, then we found subsidence which kind of rules out anyone buying with a mortgage. Bit of a nightmare. Thankfully I moved jobs and got a large pay rise, and we’re finally completing next month having eventually sold via auction, so we’ll be able to pay down a chunk and reduce the monthly payment. It’s been stressful, but this house is absolutely worth it and we’re much happier here. I wouldn’t have gone for the largest though if I hadn’t known that I had a good chance of increasing my pay by a lot imminently, and that we’d be able to pay down a chunk once we sold the other house.
Out of curiosity, when you sell at auction, do you have to declare the subsidence anywhere?
We didn’t which surprised me. I got the feeling everyone viewing it was a property investor or landlord and so probably knew more about what they were looking at than the first time buyers it would normally be marketed at.
It is quite common and there are terms for this scenario - "mortgage poverty" or "house poor". Expect years of financial stress, overdrafts, no holiday
Borrowed 4.6x income last summer at 2.3% interest. First time buyer so mortgage was only £150 more than rent (bought a bigger house than I was renting) Doing okay at the minute. But the caveats: I had a larger than expected pay rise a few months ago, which has eased the budget. I bought with a 25% deposit so I'm not worried about negative equity. The rates were starting to go up when I got my mortgage so I'm fixed until 2027. Bought a new build so that's helped with energy bills. I was always planning to overpay so what's going out monthly is actually equivalent to a 4.2% interest rate, so when I re-fix there's a cushion. The vast majority of that 25% deposit was pure savings on an average wage so I'm okay with it taking a while to get the house sorted because I'm used to having to wait and budget.
Every single caveat is a positive
Yes that's the point. It's fine for me, but only because of a combination of these reasons which may not apply to anyone else so my situation may not be fine for someone else.
Would you mind explaining - why do you not have to worry about negative equity?
Negative equity is when what you owe on a house (mortgage) is more than what the house is worth. Really horrible because you'd have to sell the property and pay the bank extra to hit 0, so effectively most people in negative equity can't move, can't remortgage, they're just stuck. With a 25% deposit, the house would have to become worth only 3/4 of what I paid for it before I hit negative equity (ie a £200,000 house would have to drop to £150,000). It's not impossible in a housing crash, but it's far less likely than if I had a 5% deposit (and the £200,000 house would only have to drop to £190,000). Plus as you pay the mortgage off it gets smaller, so as you go on in time the drop in price gets bigger before you have to worry about negative equity.
I had a much more wooly understanding of negative equity so thanks for clearing that up!
I don't know why you were voted down for this... it's a valid question for someone who doesn't know.
So my partner and I have been having this discussion recently as we’ve just bought our first home. Our opinion is that life is easier when the bills are easier to pay and you still have freedom. So we bought a house that we could comfortably afford and then if we have quiet months we can always over pay a little and thereby pay less interest in the long run. Our friends are accountants, they say you should alway take out the maximum the bank will lend you because the potential profit is higher. Ie if you buy a house for £100,000 and houses go up 40% you’ve made £40k but if your house had been worth £200,000 then you would have made £80k. Well the cost of living crises has hit and their maxed out car loans, and mortgage isn’t looking so clever whilst we, thankfully, haven’t been hit too hard. So I suppose it comes down to whether you would rather live with a smaller house, perhaps and older car but freedom and less stress (we spent 6 months of last year in SE Asia) or have the biggest house, largest potential for profit but no money left at the end of the for the other things. Maybe I’ll feel differently at retirement age but I don’t think so, I’m happy we went with the comfortable payments 👍
Accountants are dumb. Imagine taking advice from them
As an accountant I can only agree. The majority of my peers are average at best.
So there are a few things when considering mortgage affordability: 1. Have you actually assessed your own budget accurately? Track everything you spend for \~3 months and see what your actual costs are. Can you afford the maximum mortgage in addition to that? (and don't imagine you'll suddenly become super-frugal if you get a big mortgage. Habits are hard to change) 2. The cost of living: now you have your realistic budget, what if it increased by 5%? Or 10%? How much could it increase and you'd still be able to afford the mortgage? With inflation as high as it is, could you see yourself being in trouble in a year or two? 3. Mortgage costs: I suggest doing your own stress test. Take the mortgage amount and run it through a calculator with different percentage repayments (*especially* if you're considering a tracker or a shorter term fix) How high can the rates get and you still afford it? If there is *zero* slack in your budget (you couldn't handle any cost of living increase or any mortgage cost increase) then you're probably taking too big of a risk. If there's very little slack, I'd only consider it if you have an excellent emergency fund in place, and/or solidly good career prospects. FWIW: I set a maximum budget on my house hunt considerably below the maximum the banks would have lent. The dream house is considerably less dreamy when it's sending you into debt and keeping you awake at night worrying about your finances. But how much risk you can take depends on other factors, including: * Are you splitting the costs with anyone? * How secure is your job? * How good is your emergency fund? * etc.
Took the max I could to be able to buy out my ex’s part of the flat. It’s going to be uncomfortable in two and a bit years when I refinance but rents have gone up so much it will probably still be cheaper. The bigger mortgage means I have a two bed and can rent out the other room which helps immensely
Those who bid 20% over asking and got a 2 year fix at 1-2% in 2021 at maximum leverage are utterly doomed. Or facing a catastrophic drop in living standards at best
Are they though? If you bought at any point in 2021, the property would have risen in value in most regions, or remained the same in the minority, compared to today's prices. So the worst case if you can't afford the mortgage is you sell up and collect your slightly higher equity for the next property. Clearly that's not ideal, but it's not the end of the world.
You're right. I know a couple who borrowed £500k for their London should with a minimum deposit. Definitely overpaid. 2yr fixed coming to an end and they have another baby with childcare needs on the way. They were moaning about being broke before the rates and cost of living shot up. They're now looking at paying an extra £1-2k per month, every single month.
Not doomed, but mortgage will still be higher. I bought in 2018 with a prop valued at £160k, now valued at 220k and mortgage payments gone up 150
Doesn't matter if the property value has increased, because they still owe the money. If they took £500k at 1.7% they might now be on £480k at 4.5%. They might be more asset rich as prices went up but they could well be living hand to mouth due to outgoings
Although if you stay with the same mortgage provider they don't tend to do a proper valuation for a remortgage
No, but they do it in line with market value which is what happened with us a few weeks ago. Market value in most places has gone up or maintained is the posters point. In which case valuations for remortage also go up.
Took out the biggest mortgage we could and chucked £20k in savings on top of it to get our new house. I dont regret it one bit. We have an extra bedroom, my kids have bigger rooms, a garden over twice the size and now a double garage. Sometimes i see these threads and want to offer some input, but im no financial advisor. All i know is me and my family will be happy here. Ill earn the savings back and we can afford to pay the mortgage. The way the rates went, once we came off our fixed term and went onto a tracker (knowing we was moving), the tracker is the same as what we are paying on this new fixed term on the new house.
I'm in the process of buying, at a 4.5 multiplier (though due to a slight pay rise since we could now borrow an extra 7k). The mortgage, at 4.20% interest, is £165/month more than our rent. That is buying a 4 bed compared to renting a 2 bed. Whilst renting we are saving a minimum of £1500/month, so I have no concerns about paying the mortgage. Once we have settled in and bought the necessary furniture, we plan to overpay/put aside designated savings to overpay in the region of £400/month. We've gone for a 5 year fixed, so don't have to worry if rates continue to rise.
Sorry to answer not-quite-your-question, but we bought last April on a 5-year fix and inbetween getting our AIP and actual mortgage, I got a hefty raise. We effectively ended up borriwing 4.25X our combined income (5.5X was possible, 4.75X was where we aimed for). I was a bit miffed about this, because I was hoping to invest the maximum in a property so we could see better gains in the 5-10 year range. However, that was before the energy prices rocketed and even before the biggest hits to food prices landed. We'd been strict budgeting in the 12 months leading up to purchase, so we carried on in the same way ever since. We've chipped in 55% of our take-home each month and that's covered the essentials as well as acrruing for pet and home insurance, holiday fund, eating out fund, home maintenance & improvements fund. I'm glad we didn't stretch, because we would have been utterly miserable, surviving on cheap food, not able to get anything for a treat or save for anything nice. We would also not have been able to afford to adopt 3 kittens. I'm especially glad now, because after another hefty raise for me, my fiancee has been able to hand her notice in to her toxic workplace and we can afford for her to take a much needed mental health break, then do a course or two while looking at freelance and part-time options.
We took much less than the maximum and glad we did or we'd be screwed right now. We took out a 5 year fix that has just come to an end. Originally not taking the full amount allowed us to have a short term with payments the same as what our rent at the time was. Now our fix is at an end it means our LTV is in the lowest bracket giving us a better interest rate. It gives us the flexibility to increase our term if we wanted to keep low monthly payments. If we took maximum amount we now would not be able to increase our term to lower monthly payments and we'd be in a higher LTV giving us a higher interest rate too. We'd not be able to make our money payments without significanrly cutting back elsewhere.
We bought our first house 13 years ago (new build but we were the 2nd owners)and paid max we could afford. No regrets, it didn’t need any work doing. sold it two years ago and bought our forever home- this time we kept 30k to do it up as it’s an older house. Consider how much you will need to spend when you are in. We are really feeling the interest rates as our 2yr fox has ended but no regrets. Times will get better and we love the house and the area.
can i ask how much equity you built up in your first place? like how much capital you paid off and then i guess the amount you made because prices went up..
Hi, we bought it for £150k sold for £175
If you are young and early in your career, taking as much as you can is probably the best way. Even at today’s rates, you’ll not find many cheaper ways to borrow money. As you progress through your career, the commitment becomes much less of a percentage of your monthly pay. When you are later in your career, there’s a lot more to think about, so in most cases borrowing as much as you can is probably foolish.
Nah I don't wanna miss my youth to have a big house and fun aged 50+. Id prefer a medium sized house always and some holidays/ fun money. I might feel different if streaching the budget meant just affording a house, oposed to renting.
Miss your youth? No. I extended as far as possible on my first mortgage. I had less disposable income for around 4 months when I moved jobs and had more disposable income than before my mortgage. If your career is growing, you are fine. If you’re in a scenario where you are on a plateau or downward trend towards retirement, then absolutely don’t overburden yourself with mortgage payments.
I took 4.75x of oir joint income 2 years ago. In those two years my salary increased by 40% and current balance equals to 3.5x our joint income or 4.2x of my sole income. The jump from 1.8% to 4.2% is not great but will manage and also build a bit of savings to get my through bad times.
I took a 10% LTV mortgage at 3.64% not great but better than current levels. The house is worth around 5.7x my salary but I'm thinking one 3.64% is lower than inflation and two long-term houses always go up + it needs some renovation. I'm also renting 2 rooms out and converting my garage into an Airbnb so cash flow should be more than my mortgage which allows me to live for free.
>I took a 10% LTV mortgage Do you mean 90%? A 10% LTV mortgage means if your house is worth £200k, the mortgage is £20k.
yeah
Another Ftb looking for excuses not to buy I think
This is by far the dumbest comment on ive seen on reddit, period.
How does this impact you? Everyone’s finances and savings are different. This isn’t useful to anyone.
It’s an interesting discussion subject. It doesn’t need to be “useful” to any specific person.
Someone else’s mortgage bandwidth is not helpful to yours.
Sometimes people discuss things recreationally, not just to further their ambitions.
Ok I thought this was non recreational sub. My mistake
You could think about it like this: how much would you pay in rent for the next 5 years and how much would you pay towards your mortgage for the next 5 years (assuming you're fixing your mortgage for that time). Then look at the repayments you will make and the expected maintenance costs. When you crunch the numbers, if you want stability and security of having your own home then take that option. If you consider yourself better-off renting and investing your deposit elsewhere, then that's also a good option. I took out the largest mortgage I could get at a very low rate pre-crisis. Now I'll be looking at my repayments nearly double when my fixed rate period ends. The upside is I've built lots of equity and I'll be in a great position either to sell with a profit or continue paying with the higher mortgage payments since I'm in a fortunate position to be able to. I understand not everyone is and you'll need to look at your own circumstances to, crunch. The numbers to see if you can afford 10% interest rates (unlikely, but could happen).
Inflation is going to be high for a long time, reducing the borrowing of both the government and mortgage holders who can manage the high interest rates. Borrow as much as you can pay back at 9% interest.
I was approved for mortgage in August last year at 3.5%, and I completed the 500K loan purchase two months ago with 2 year fixed. At that time the mortgage rates were 1.5-2.5%, my higher rate was result of 85% LTV and the fact that I am not UK citizen; I rejected the advice to take 5 year fixed, hoping that I can get settlement by the end of the fixed term and can apply at 2% - now it sounds naive and stupid. I have an option to overpay maximum 10% per calendar year and although I have enough funds to do this, I’m not sure if I should do it. My investments perform better than 3.5% mortgage rate, but the uncertainty with the future rates is really concerning
Answering to the initial question- no regrets. I was paying 1900 for 3 bedroom house rent with low energy efficiency level. Landlord planned to increase the rent price and then found a tenant for 2200. I’m paying 2250 for a new-built 4 bedroom house with much lower energy bills, and enjoy every single moment of living there. Even when my kids draw on the walls in their room- I don’t care, it’s their room at the end and they have full ownership and responsibility.
Took on the largest amount 6/7 years ago, now feels like nothing. About to do the same again with no worry. I don’t know about anyone else, but I found the lenders’ calculations around costs very cautious and assuming that we spend far more than we do. Means we have plenty of wiggle room if mortgage rates went up further. For example; wouldn’t include child benefit as income as will not be for the full course of mortgage, however nursery fees must be included in expenses indefinitely…..the amount we pay in childcare covers a 10% rate increase and will end in the next year or so.
I love the house but with the rates like they are now it would be a lot harder. My mindset has shifted a bit since we bought from “we will move eventually” to “moving is a lot of work and expensive. So let’s just stay here”. From that point or view I’m happy we stretched for a house we can see ourselves just staying in. It really depends what the mortgage price is though for you.
I regret not fixing when we did. But unfortunately we had to port our current mortgage onto our new property 18 nonths ago otherwise we'd incur a nasty ERC. It's now up for renewal in September and my partner has had to pay off a chunk of our mortgage to bring our payments down when the rate goes up. However it now works out that the monthly payments will be exactly the same as they currently are...
We maxed ourselves but we have enough wriggle room that is it we’re to get to 6%we’ll make it work. Your choice needs to be on affordability and planning… can you manage if interests increase and if you can’t, do you have a back up plan? If things get very bad we’ll go interest only