How far to stretch for First Home?

[Gareth79]

XMT said:

towser44 said:

Different strokes for different folks isn't it, but we definitely didn't stretch for our first home and I've no intention of hiking our debts to move either. For me personally, being easily able to afford our mortgage and all other outgoings with a minimum wage job should the worst happen makes me more comfortable than overstretching. I'm a captain cautious and even though we could afford it, I would worry myself to death if I had a £1,000+ a month mortgage, like most people I know have.

I am the exact same!
Even just the idea of having so much debt gives me sleepless nights. I am about to buy my first home having managed to save up 50% deposit with many sacrafices and even then getting a mortgage 2x my income is giving me little sweaty palms.

I know it doesn't bother some people at all to have large debts but it does to me as I have seen what its done to people who thought "it will be fine" and been up sts valley few years down the line or even 10 years down the line.

Personally its just not worth the stress, the idea of having something then falling back down for (in my eyes) being greedy and juming the gun is silly.
I would be heart broken to let me family down in such a way.

If you have saved 50% then barring some catastrophic problem with the economy then you will always have a substantial amount of equity in the house as a buffer, and if you ever need it then you can just sell the house and rent somewhere.

[tighnamara]

mike74 said:

Not quite.

Own my own house, purchased when prices were sensible, now mortgage free, six figure savings in the bank and work 15 hrs a week.

I just enjoy laughing at people getting themselves into unprecedented levels of debt buying into the current property bubble yet they seem to think it's something worth boasting about as if they're some kind of financial genius, rather than just admitting they've had no other choice than to bend over and apply generous amounts of lube in order to become the proud owner of a mortgage.

Very bizarre to enjoy laughing at people just because I am alright Jack.
Only person boasting here is yourself about being mortgage free, xxxxxxx in the bank.
What are people meant to do, continue and pay high rent to landlords or try and get on the property market ?
Are you saying now that prices are "not sensible" that people should not purchase property ?

I bet you are one of the baby boomers who have had all the luck of massive increase to house values and a great pension sitting waiting for your retirement.

Each to their own though, enjoy your happy little life.

[Hackney]

Don't get a mortgage so big you can't do anything else.

We bought for the first time recently and I'm so glad we didn't over stretch. We could've put more to the deposit and we could've gone for 4 bed rather than three (or a studio in London where we moved from) but we didn't.

We'd got a decent deposit, used the govt scheme to help and made sure we had cash to pay all the fees and buy furniture we needed. Stress "needed". There's still some things we want to do, but we're in no rush. It's a new build so wallpaper and painting were out for the first few months and will probably be done next summer.

Not over stretching on the house meant we could get the car my wife needed now we're out of London.
It meant we'd factored in maternity leave for my wife.

It also meant that when a new job came up for me recently I could move quickly when I saw a good deal on a new car that I'd need for the job.

There are always unforeseen circumstances but you can put yourself in a position to manage them.

[XMT]

tighnamara said:

mike74 said:

Not quite.

Own my own house, purchased when prices were sensible, now mortgage free, six figure savings in the bank and work 15 hrs a week.

I just enjoy laughing at people getting themselves into unprecedented levels of debt buying into the current property bubble yet they seem to think it's something worth boasting about as if they're some kind of financial genius, rather than just admitting they've had no other choice than to bend over and apply generous amounts of lube in order to become the proud owner of a mortgage.

Very bizarre to enjoy laughing at people just because I am alright Jack.
Only person boasting here is yourself about being mortgage free, xxxxxxx in the bank.
What are people meant to do, continue and pay high rent to landlords or try and get on the property market ?
Are you saying now that prices are "not sensible" that people should not purchase property ?

I bet you are one of the baby boomers who have had all the luck of massive increase to house values and a great pension sitting waiting for your retirement.

Each to their own though, enjoy your happy little life.

In fairness to Mike74 - even though he is coming across in the wrong way I still think his point is valid. I have many around me who think they "need" to take out the huge mortgages to get onto the property ladder etc etc

Yes that is the case sometimes but I would say at least in a good 50% of cases its not. A prime example are a few of my friends who have purchased houses and put themselves into debt to the nth degree - literally maxed out on every way possible JUST to be in a certain area. These are not areas that have good schools or close to hospitals etc etc nothing like that - just that they appear to be better.

In my opinion thats crazy - I would rather live in a place say 10/20 mins out of the main city/town and get something much nicer, much bigger for less money.
They bought theirs on the assumption they will go up. I doubt they will.

I think what Mike74 is saying is that sometimes its not 100% needed to put yourself into SO MUCH debt. Be smarter about it, slicker about it, theres a time and a place to have things.

My friends baffle me sometimes, House mortgaged with minimum deposit, expensive watches on finance, cars on finance, iMac on finance, fking hell even their golf clubs are financed.
Dead against such a way of life however as has been said - each to their own.

[tighnamara]

XMT said:

In fairness to Mike74 - even though he is coming across in the wrong way I still think his point is valid. I have many around me who think they "need" to take out the huge mortgages to get onto the property ladder etc etc

Yes that is the case sometimes but I would say at least in a good 50% of cases its not. A prime example are a few of my friends who have purchased houses and put themselves into debt to the nth degree - literally maxed out on every way possible JUST to be in a certain area. These are not areas that have good schools or close to hospitals etc etc nothing like that - just that they appear to be better.

In my opinion thats crazy - I would rather live in a place say 10/20 mins out of the main city/town and get something much nicer, much bigger for less money.
They bought theirs on the assumption they will go up. I doubt they will.

I think what Mike74 is saying is that sometimes its not 100% needed to put yourself into SO MUCH debt. Be smarter about it, slicker about it, theres a time and a place to have things.

My friends baffle me sometimes, House mortgaged with minimum deposit, expensive watches on finance, cars on finance, iMac on finance, fking hell even their golf clubs are financed.
Dead against such a way of life however as has been said - each to their own.

Agreed, but it was the smarmy way he was trying to get his point across.
His approach could have been better....

[XMT]

Gareth79 said:

XMT said:

towser44 said:

Different strokes for different folks isn't it, but we definitely didn't stretch for our first home and I've no intention of hiking our debts to move either. For me personally, being easily able to afford our mortgage and all other outgoings with a minimum wage job should the worst happen makes me more comfortable than overstretching. I'm a captain cautious and even though we could afford it, I would worry myself to death if I had a £1,000+ a month mortgage, like most people I know have.

I am the exact same!
Even just the idea of having so much debt gives me sleepless nights. I am about to buy my first home having managed to save up 50% deposit with many sacrafices and even then getting a mortgage 2x my income is giving me little sweaty palms.

I know it doesn't bother some people at all to have large debts but it does to me as I have seen what its done to people who thought "it will be fine" and been up sts valley few years down the line or even 10 years down the line.

Personally its just not worth the stress, the idea of having something then falling back down for (in my eyes) being greedy and juming the gun is silly.
I would be heart broken to let me family down in such a way.

If you have saved 50% then barring some catastrophic problem with the economy then you will always have a substantial amount of equity in the house as a buffer, and if you ever need it then you can just sell the house and rent somewhere.

I understand what you are saying but for me I want to pay off the dam thing in 3-5 years max. The idea of paying something off for 25 years plus and near enough giving back double what I borrowed makes me sick to the pit of my stomach.

[NRS]

XMT said:

I understand what you are saying but for me I want to pay off the dam thing in 3-5 years max. The idea of paying something off for 25 years plus and near enough giving back double what I borrowed makes me sick to the pit of my stomach.

The question is how long did it take to save the 50%, and how much did the prices go up in that time? It isn't great paying back double of what you borrow, but if during the time it took you to save the full amount the house prices triple then it would have been better to take the high debt at the start. Also I guess you will be overpaying now with the low interest rate, so hopefully it won't be as much as double that you pay in interest/ 25 years.

[blank]

XMT said:

I understand what you are saying but for me I want to pay off the dam thing in 3-5 years max. The idea of paying something off for 25 years plus and near enough giving back double what I borrowed makes me sick to the pit of my stomach.

If you live in a cheap area or earn huge money then a 50% deposit and mortgage free in 5 years is great.

Unfortunately it's not a realistic proposition for most people.

[caiss4]

tighnamara said:

Very bizarre to enjoy laughing at people just because I am alright Jack.
Only person boasting here is yourself about being mortgage free, xxxxxxx in the bank.
What are people meant to do, continue and pay high rent to landlords or try and get on the property market ?
Are you saying now that prices are "not sensible" that people should not purchase property ?

I bet you are one of the baby boomers who have had all the luck of massive increase to house values and a great pension sitting waiting for your retirement.

Each to their own though, enjoy your happy little life.

Yes Mike74 does come over as a little bit 'I'm alright Jack' but if his 'nom de plume' reflects his age then I pre-date him and I'd just like to present some real numbers from when I joined the property ladder.

Bought a flat in 1983 for £27k. Put down a deposit of £3,900 and the monthly mortgage repayments were £182.50 at a variable interest rate of 11.25%. My net income at that time was £418.12 per month, so 43% of income. Part of the deposit was a loan from my parents who were repaid over the first 12 months. I couldn't really afford to live in the property until I had paid off the parental loan. I could do this because I had no dependents and I wasn't tempted by PCP deals on cars etc because they didn't exist!

Sold the flat in 1986 for £42k and bought a 3 bed semi for £73k but only with the assistance of my future wife's income. Mortgage repayment was £574 per month at 11% p.a and my net income was £831 so 69% of my net. (My future wife kept to the deal ) By March 1990 the mortgage payment was £664, however, my net had risen to about £1200 so manageable.

Conclusion - stretch yourself but take in to account realistic opportunities to increase your earning potential. I'll be honest and say I got lucky (I had a reasonable expectation of increased earnings) but the macro-economic environment can throw some curved balls. We've been through an extended period of low interest rates and I don't see that changing immediately so base any borrowing on future income potential plus an interest hike.

It's highly unlikely you could identify the 'forever' house right now (unless you have a complete family and schooling to 18 has been identified). At the same time, try and cover the school issue now if you can ( I didn't and it cost me at least one house move)

[egor110]

When he says forever house i wonder if he means family house?

Why get a pokey flat or 2 up 2 down when you could get a 3 bed semi and future proof yourself.

[Sarnie]

As a Mortgage Broker, this thread is very interesting. Without doubt, THE most common question I get asked is "Whats the maximum I can borrow?"............I would say that at least 8/10 clients lend at their maximum lending figures.......not many people come back and say they found a much cheaper property! Most come back and say they found more expensive property.............

[egor110]

Sarnie said:

As a Mortgage Broker, this thread is very interesting. Without doubt, THE most common question I get asked is "Whats the maximum I can borrow?"............I would say that at least 8/10 clients lend at their maximum lending figures.......not many people come back and say they found a much cheaper property! Most come back and say they found more expensive property.............

Me and the mrs got our 1st house in the 90's on a fairly modest postie/nurses wage.

Mortgage broker A advised us he sorted loads of posties out and knew even though our flat weekly wage was modest that he knew how much overtime we did so go find the house we wanted and he'd make sure we'd get the mortgage.

Broker B was a very old school bank manager type , he advised be cautious , don't include my overtime as it may stop and it has drastically been cut over the years and to get a house we could comfortably afford.

That was the best advice we've ever received , whilst we'll never be rich we've almost paid off the mortgage by our mid 40's and don't really worry about money.

[XMT]

NRS said:

XMT said:

I understand what you are saying but for me I want to pay off the dam thing in 3-5 years max. The idea of paying something off for 25 years plus and near enough giving back double what I borrowed makes me sick to the pit of my stomach.

The question is how long did it take to save the 50%, and how much did the prices go up in that time? It isn't great paying back double of what you borrow, but if during the time it took you to save the full amount the house prices triple then it would have been better to take the high debt at the start. Also I guess you will be overpaying now with the low interest rate, so hopefully it won't be as much as double that you pay in interest/ 25 years.

I totally understand view point regarding house prices haven gone up in that time etc etc but I have monitored the market, they have stayed the same as far as I can see or minimal increases. It took me 3.5 years to save the 50% deposit.

Yes the area is average prices for scotland. 4 bed family home around 250k.

[p1stonhead]

XMT said:

NRS said:

XMT said:

I understand what you are saying but for me I want to pay off the dam thing in 3-5 years max. The idea of paying something off for 25 years plus and near enough giving back double what I borrowed makes me sick to the pit of my stomach.

The question is how long did it take to save the 50%, and how much did the prices go up in that time? It isn't great paying back double of what you borrow, but if during the time it took you to save the full amount the house prices triple then it would have been better to take the high debt at the start. Also I guess you will be overpaying now with the low interest rate, so hopefully it won't be as much as double that you pay in interest/ 25 years.

I totally understand view point regarding house prices haven gone up in that time etc etc but I have monitored the market, they have stayed the same as far as I can see or minimal increases. It took me 3.5 years to save the 50% deposit.

Yes the area is average prices for scotland. 4 bed family home around 250k.

Whereas its £550k-skys the limit round my way or to rent it would be £2k a month.

£1000 a month for a mortgage isnt high for the South East. Some of my friends are renting rooms (not flats just rooms!) for £5-600 a month.

Edited by p1stonhead on Monday 17th October 09:23

[z4RRSchris]

i'm with Mike, and as one of the generation who has been shat on i wont be debting myself up anytime soon to buy a house.

So many friends with BOMD have taken on unreal levels of debt to buy 1/2 beds in islington / clapham etc, they all believe in price growth of the last 20 years happening for the next 20 years.

Two of them have sold recently, both lost money.

[The Moose]

z4RRSchris said:

i'm with Mike, and as one of the generation who has been shat on i wont be debting myself up anytime soon to buy a house.

So many friends with BOMD have taken on unreal levels of debt to buy 1/2 beds in islington / clapham etc, they all believe in price growth of the last 20 years happening for the next 20 years.

Two of them have sold recently, both lost money.

Where abouts in the world do you live and what's the rent like?

[tighnamara]

z4RRSchris said:

i'm with Mike, and as one of the generation who has been shat on i wont be debting myself up anytime soon to buy a house.

So many friends with BOMD have taken on unreal levels of debt to buy 1/2 beds in islington / clapham etc, they all believe in price growth of the last 20 years happening for the next 20 years.

Two of them have sold recently, both lost money.

Says the man who was willing to take a hit on a Ferrari.

From a previous post.
"that said I'm thinking of putting 80k into a Gallardo but I'm prepared for it to be worth 50k when the market turns"

[deckster]

mike74 said:

Not quite.

Own my own house, purchased when prices were sensible, now mortgage free, six figure savings in the bank and work 15 hrs a week.

I just enjoy laughing at people getting themselves into unprecedented levels of debt buying into the current property bubble yet they seem to think it's something worth boasting about as if they're some kind of financial genius, rather than just admitting they've had no other choice than to bend over and apply generous amounts of lube in order to become the proud owner of a mortgage.

And, of course, are now unbearably smug at being fortunate enough to have bought when houses were cheap and trying to pass it off as exactly the kind of financial acumen in exactly the same way that you are sneering at other people for. Are we supposed to be impressed?

[z4RRSchris]

The Moose said:

Where abouts in the world do you live and what's the rent like?

Liverpool Street. I have mates rates and pay £1800pm all in, its a million quid flat.

i suspect to buy it id be looking at a 500k deposit and 500k mortgage at circa £1250pm? plus bills.

broadly similar, but i don't have 500k + SDLT and don't want 500k debt.

[p1stonhead]

z4RRSchris said:

The Moose said:

Where abouts in the world do you live and what's the rent like?

Liverpool Street. I have mates rates and pay £1800pm all in, its a million quid flat.

i suspect to buy it id be looking at a 500k deposit and 500k mortgage at circa £1250pm? plus bills.

broadly similar, but i don't have 500k + SDLT and don't want 500k debt.

yes its debt but you dont have to spend that much. At the moment you are buying someone else's house for £1800 a month....