House / Mortgage Advice

[RowntreesCabana]

Finance is not my strong point, so I'm after a bit of advice.

I currently have about a year or two left on my mortgage and have just started looking at other properties. I've always fancied a country cottage with a large garden, detached garage,etc. My current house is nice enough, in a quiet cul-de-sac, two minutes from work. In all honesty its fine for our needs.

As much as I'd like to buy a new place, I'd be looking to borrow another £150-180k to get the house I want. I'm 41 and I've been in my job now for 3 years.

There are a couple of things that are putting me off, these being interest rates (surely will begin to rise again shortly), and employment. The interest rates will rise and as a guide, I think the average is 5% over the last 15/20 years. How much should you really leave from your salary to cover yourself for future rises?

The other thing is the employment market. I have a degree in Computer Science, but this was obtained just under 20 years ago and is therefore pretty obsolete in my mind. I'm currently in a job where the only prerequisite was a degree, the job itself does not qualify you for anything, its a mixture of lab work and quality assurance. So the fear I have is based on not having a profession to fall back on should this job go down the pan.

I could stay here and live care-free (on the basis of being mortgage free) for the rest of my days as far as finances go, or I could jump into another 25 year mortgage and live in a nice place with a bit of land.

Has anyone else done something similar, if so how do you feel now, happy or regretting it?

Opinions?

Thanks

[RowntreesCabana]

Buster73 said:

Nike.

I'm a natural worrier, so that's alien to me. Sad I know as you're only here once.

[RowntreesCabana]

BoRED S2upid said:

I'd certainly be seeing what it feels like to be mortgage free for a bit and what that extra cash can buy you.

That's the sensible option and the one I'll probably end up taking.

[RowntreesCabana]

FredClogs said:

For a single guy I think it is, it's a grand a month ish. mind you I've lived in the north for a long time, I don't know what normal down there is.

I have a wife too. I thought the average house in the UK was about £180k these days so thought that was pretty much normal, or is it because I'm 41? A 25 year mortgage will be seeing me into the 60's, that's the main concern.

I can't see me going for it unfortunately, I worry to much.

Edited by RowntreesCabana on Tuesday 23 June 16:03

[RowntreesCabana]

Buster73 said:

I was in a similar position 12 years ago , stay in a nice house paid off in full or move up to a bigger house .

I moved , best thing I ever did , less commuting , more room inside and out , met loads of new people .

As a plus point but secondary to my reasons for moving , my old house is now worth about £50k more than when I sold it , whilst this one has gone up over £150k during the same time , those valuations on houses sold not estate agent valuations.

How do your circumstances differ though? How old were you when you did that, do you have a profession?

[RowntreesCabana]

After thinking about it overnight, I just don't think I can stand the thought of having a mortgage which would be due to finish when I'm 66

[RowntreesCabana]

GreatGranny said:

Christ, I thought I was risk averse :-)

You do know just because you take out a 25 year mortgage you won't necessarily be actually paying it off for 25 years don't you?

Go online see what you can afford a month them try out different/shorter terms or as above, overpay. You may be surprised by how much the term decreases.

If you would like to live in a nice cottage then go for it.

Get redundancy/critical illness cover if you are nervous about being out of work.

Does you wife work? If so the chances of both of you being out of work at the same time is pretty remote so there will always be one salary coming in.

I know I can overpay it, I've been doing that with this one, which has taken 15 years. I'm looking at the worse case scenario, and with the possible/probably interest rate hikes. The wife does work, but I don't want her to be working for too many years, I suppose we need to set out our priorities.

Looking at the figures, a 180k mortgage will cost about £750pm, if we added £500pm to that it would be over in 13 years, however, that's not taking into account interest rates going up. If there was to be a hike up to 5% then it could potential be leaving me in a very dark place, as too I would imagine quite a few mortgage owners.

Edited by rowntreescabana on Wednesday 24th June 12:15

[RowntreesCabana]

PomBstard said:

Have been within 5 years of being mortgage free twice. First time was 11 years ago and the proceeds of the sale of our house in the UK funded, just, the deposit for our first unit out here. Last time was 4 years ago when we decided to move from the 2/3 bed unit to a 5 bed house. However, we worked very hard to make the move without selling the unit - borrowed against increased equity to fund 20% deposit, and then put tenants in the unit at a rate that almost covered the mortgage. We budgeted for 7% interest rates, and all sorts of additional expenditure, and whilst scary at the time, realised we were still only 39 then, so we had time to figure it all out.

Four years later, drop in interest rates plus increase in rent means unit is paying for itself and has gone up about 20% in that time. Additional comfort now from knowing that if I needed to, I could sell the house, move back to the unit and be mortgage free immediately. And this is our long-term plan, when the kids are older...

What I'm getting at is, is there any way you could fund the new place with equity from your existing home, and have both properties? Might seem a bit of a gamble or be uncomfortable for a while, but could lead to capital gains from two places.

Thanks for that, it's interesting and giving me another angle to look at.

[RowntreesCabana]

Ari said:

I can't see how it is possible to offer advice without knowing what the OP earns. To my mind the wisdom of taking on £150K plus worth of debt would be greatly influenced by whether he earns (say) £25K a year or £250K a year.

From my own personal experience however, I can say that I live in a modest house entirely adequate for my needs and upon which I cleared the mortgage about a decade ago. And it has transformed my way of life.

Proper savings for the first time (I could never see the point whilst owing money on a mortgage, you're effectively just borrowing the money you have in savings and paying more interest than you're earning so I overpaid rather than saved).

My outgoings are now a few hundred pounds a month.

When I lost my job at the beginning of the recession I didn't have to panic about finding something - anything, which removed the stress.

And most of all, it allowed me to pursue a new and completely different self employed career which I love (both being my own boss and what I actually do). There is no way I could have tried (or risked) that with a big mortgage millstone around my neck.

Finally, there's something really satisfying about knowing you own your home and no one can take it off you (unless something really goes wrong! Or you get married - arguably the same thing!)

So I'll go against the 'just do it' brigade, there's far far more to life than sweating over a six figure debt commitment just to live in a great big house.

But as I say, it does depend what you earn - tell me the OP clears ten grand a month and I'll change my tune!

I earn £37k, my wife about £24k. I have a couple of small debts that I can pay off now, so, if we did decide to go for this, we'd have zero debt other than the £670pm (overpaying about £200pm) we're paying at the moment for the next two years. At the moment we tend to spend a fair bit just eating out and socialising, with a new house that would be knocked on the head a bit. We're in South Wales too, so property is obviously a fair bit cheaper than the South East.