Should I Stay Or Should I Go, Now?
Discussion
Hi Folks
I appreciate that this is really only a decision that we can make, however I’d be really grateful for some impartial opinions.
Upshot of the scenario is that Lady Bristol (to be) and I would like to purchase a new house, our ‘forever home’, timescale likely to be early to mid 2020.
For some scene setting, we are currently in our first house, both early 30s, and both work full time, and no children.
I’m trying to do as much sensible budgeting and planning as to what the effects of taking on a larger mortgage would be. But I’m finding it hard to know what a sensible level of wiggle room is when it comes to affordability. I’ve always been quite risk averse, however a couple of years ago I lost a colleague and friend in a horrific accident, who had squirrelled away his entire life, and never realised any of what he’d worked so hard for.
It gave me a bit more of a ‘live for today’ mentality but still very much with one eye on not over committing to a foolish degree.
Anyway, all of the relevant figures that I can think of are shown below. The first column considers things as they stand based on the house we are in now and the second column is based on the hypothetical move to the forever home. Figures have been rounded up and down to keep it clean but essentially all the info needed should be there.
I’ve even gone as far as working out the effect of interest rate rises - up to 6% - and what impact that would have on disposable income.
On the face of it, based on current market conditions, there appears to be very little risk in taking on the larger mortgage. It has very little effect on disposable income (guaranteed salary increases essentially negating the increase in repayments)
It’s only when you start looking at potential rate rises that things become less clear. Obviously the potential rises make a big difference to the effect on disposable income.
What would you do in my position? Settle on the smaller house in the less desirable location or take the plunge? Part of me says stay out and enjoy the comfort of knowing you’re never really going to be under any pressure and part of me says that if we don’t do it now (well, 2020....), there’s a good chance we never will.
The other factor is that once we’ve been through the move we’d probably start thinking about raising a family. Luckily, nearly 70% of the take home pay comes from me so the impact of losing a salary for a while will be minimal compared to if Mrs B-to-Be was the larger earner. Of course there are no guarantees that we will even be able to have children so I kind of feel like we shouldn’t put our lives on hold and not so what we want to do based on a situation that may not arise.
One other detail that’s not clear from my illustration is that in 2022 our monthly outgoings reduce by nearly £300, so that’ll be c. 20% reduction in monthly outgoings.
The reason we’d wait until 2020 is that in a years time we are getting married. The idea would be that when we are back from our honeymoon we would save for a year to raise the costs of moving (SDLT, Legal, Estate Agent etc) so that 100% of the equity on sale of current house would be used as the deposit.
I’ve waffled on a lot so I’ll leave the details below and would welcome any thoughts on the situation.
Cheers!
I appreciate that this is really only a decision that we can make, however I’d be really grateful for some impartial opinions.
Upshot of the scenario is that Lady Bristol (to be) and I would like to purchase a new house, our ‘forever home’, timescale likely to be early to mid 2020.
For some scene setting, we are currently in our first house, both early 30s, and both work full time, and no children.
I’m trying to do as much sensible budgeting and planning as to what the effects of taking on a larger mortgage would be. But I’m finding it hard to know what a sensible level of wiggle room is when it comes to affordability. I’ve always been quite risk averse, however a couple of years ago I lost a colleague and friend in a horrific accident, who had squirrelled away his entire life, and never realised any of what he’d worked so hard for.
It gave me a bit more of a ‘live for today’ mentality but still very much with one eye on not over committing to a foolish degree.
Anyway, all of the relevant figures that I can think of are shown below. The first column considers things as they stand based on the house we are in now and the second column is based on the hypothetical move to the forever home. Figures have been rounded up and down to keep it clean but essentially all the info needed should be there.
I’ve even gone as far as working out the effect of interest rate rises - up to 6% - and what impact that would have on disposable income.
On the face of it, based on current market conditions, there appears to be very little risk in taking on the larger mortgage. It has very little effect on disposable income (guaranteed salary increases essentially negating the increase in repayments)
It’s only when you start looking at potential rate rises that things become less clear. Obviously the potential rises make a big difference to the effect on disposable income.
What would you do in my position? Settle on the smaller house in the less desirable location or take the plunge? Part of me says stay out and enjoy the comfort of knowing you’re never really going to be under any pressure and part of me says that if we don’t do it now (well, 2020....), there’s a good chance we never will.
The other factor is that once we’ve been through the move we’d probably start thinking about raising a family. Luckily, nearly 70% of the take home pay comes from me so the impact of losing a salary for a while will be minimal compared to if Mrs B-to-Be was the larger earner. Of course there are no guarantees that we will even be able to have children so I kind of feel like we shouldn’t put our lives on hold and not so what we want to do based on a situation that may not arise.
One other detail that’s not clear from my illustration is that in 2022 our monthly outgoings reduce by nearly £300, so that’ll be c. 20% reduction in monthly outgoings.
The reason we’d wait until 2020 is that in a years time we are getting married. The idea would be that when we are back from our honeymoon we would save for a year to raise the costs of moving (SDLT, Legal, Estate Agent etc) so that 100% of the equity on sale of current house would be used as the deposit.
I’ve waffled on a lot so I’ll leave the details below and would welcome any thoughts on the situation.
Cheers!
only you can know - and as you've said it's based on your ability to keep a job, or get another job if you lose the one you have.
I think the general advice is buy the best you can afford when it comes to property, as it's rarely a bad investment.
That being said - don't shackle yourself for the next 25 years or whatever the term is.
For info - my mortgage (it's 2 years old and has 23 years to run) is 10% of my take home salary PCM - I personally wouldn't go past 25% but i'd be interested to hear what other people do.
edited to add - interest rates were big problems back in the day when my parents were younger, but i'd be surprised if we saw that level of evil again.
I also went fixed 5 year term on the 2 year remortgage - to get past Brexit to try and stabilise anything that might come up as a result of that.
I think the general advice is buy the best you can afford when it comes to property, as it's rarely a bad investment.
That being said - don't shackle yourself for the next 25 years or whatever the term is.
For info - my mortgage (it's 2 years old and has 23 years to run) is 10% of my take home salary PCM - I personally wouldn't go past 25% but i'd be interested to hear what other people do.
edited to add - interest rates were big problems back in the day when my parents were younger, but i'd be surprised if we saw that level of evil again.
I also went fixed 5 year term on the 2 year remortgage - to get past Brexit to try and stabilise anything that might come up as a result of that.
Edited by RacerMDR on Tuesday 9th January 10:59
RacerMDR said:
only you can know - and as you've said it's based on your ability to keep a job, or get another job if you lose the one you have.
I think the general advice is buy the best you can afford when it comes to property, as it's rarely a bad investment.
That being said - don't shackle yourself for the next 25 years or whatever the term is.
For info - my mortgage (it's 2 years old and has 23 years to run) is 10% of my take home salary PCM - I personally wouldn't go past 25% but i'd be interested to hear what other people do.
edited to add - interest rates were big problems back in the day when my parents were younger, but i'd be surprised if we saw that level of evil again.
I also went fixed 5 year term on the 2 year remortgage - to get past Brexit to try and stabilise anything that might come up as a result of that.
Good point about the job. We are both in fairly decent professional job markets (finance and insurance) and I’d have no worries about either of our ability to get a job of equal pay quickly should the worst ever happen. I think the general advice is buy the best you can afford when it comes to property, as it's rarely a bad investment.
That being said - don't shackle yourself for the next 25 years or whatever the term is.
For info - my mortgage (it's 2 years old and has 23 years to run) is 10% of my take home salary PCM - I personally wouldn't go past 25% but i'd be interested to hear what other people do.
edited to add - interest rates were big problems back in the day when my parents were younger, but i'd be surprised if we saw that level of evil again.
I also went fixed 5 year term on the 2 year remortgage - to get past Brexit to try and stabilise anything that might come up as a result of that.
Edited by RacerMDR on Tuesday 9th January 10:59
I’m also lucky with who I work for as redundancy just doesn’t happen. If you’ve been here less than 20 years you’re considered new(!)
Like you say I’m also keen to get the best we can afford as quickly as possible and know that I’m where I want to be for the next 30 years but I like to be as diligent as possible with such a big commitment.
I think I’d certainly fix for 5 years from 2020 to safeguard through the potential child raising years!
I don't see many people regretting buying a new house as soon as possible. (Not withstanding break ups etc which tend to generate threads but you're obviously solid otherwise you wouldn't be buying).
As long as you have enough after for enjoying yourself so you don't feel shackled that go as far as your risk appetite allows.
As I said - mine is 25% risk - but try and keep it much lower.
PLus interest rates are literally as low as they can be at the minute - so fix it as long as possible would be (and was my given advice)
As long as you have enough after for enjoying yourself so you don't feel shackled that go as far as your risk appetite allows.
As I said - mine is 25% risk - but try and keep it much lower.
PLus interest rates are literally as low as they can be at the minute - so fix it as long as possible would be (and was my given advice)
We used to have interest rates of 10% and more quite often back in the day. Younger people have never seen that and are unlikely to, but we all managed and suspect you would too.
Personally I'd do it now and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a, likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
Personally I'd do it now and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a, likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
Edited by anonymous-user on Tuesday 9th January 11:17
keirik said:
We used to havr interest rates of 10% and more wuite often back in the day. Younger people have never seen that ans are unlikely to, but we all managed and suspect you would too.
Personally I'd do it not and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and.took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
Can’t really take any action now unfortunately. Saving hard for the wedding and honeymoon - already committed expenditure at this stage - and when that’s over (this time next year) we will be at precisely zero cash funds. Personally I'd do it not and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and.took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
Will then take us a year or so to raise the £20k needed for stamp, fees, moving costs etc.
Of course we could theoretically do all that out of the equity in Jan-19 but would take a big chunk of it and increase the borrowing and LTV.
keirik said:
We used to have interest rates of 10% and more quite often back in the day. Younger people have never seen that and are unlikely to, but we all managed and suspect you would too.
Personally I'd do it now and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a, likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
good points - and if it is a forever home it doesn't really matter if it goes up in value after you've bought it, but it certainly does before............so get it done asapPersonally I'd do it now and not wait until 2020. Depending where you are that could be a huge rise in property costs. If you bought now that would be profit instead - in case you decided your forever home isn't actually that, plus if you're going for a 5 year fixed rates surely it would be better to do it now rather than at a, likely to be, higher rate in 2 years.
Fwiw my first mortgage was 4x salary at 12% and took a huge % of my take home but it was worth it as it got me on the ladder to where I am now - 3 properties and retired at 56
Edited by keirik on Tuesday 9th January 11:17
BRISTOL86 said:
RacerMDR said:
good points - and if it is a forever home it doesn't really matter if it goes up in value after you've bought it, but it certainly does before............so get it done asap
I just don’t see how that’s feasible with no cash. Obviously depending on who you listen to on Brexit, it could mean your dream house is cheaper in 2020. Buy the ticket take the ride.
RacerMDR said:
well asap is as soon as you can, rather than from a magic money tree. I guess my point is don't wait if you can.
Obviously depending on who you listen to on Brexit, it could mean your dream house is cheaper in 2020. Buy the ticket take the ride.
Well if we moved now and bore all the costs entirely out of the completion we’d probably end up with c. £50k as a deposit, so £20k more on the mortgage and a LTV of 87%Obviously depending on who you listen to on Brexit, it could mean your dream house is cheaper in 2020. Buy the ticket take the ride.
Of course as you rightly say if we wait two years then the house could be £50k more and we’d need a larger mortgage again....
Argh!
it is stressful - but having done it loads of times.............just crack on.
It'll go up, it'll go down, it'll cost money , it'll be a PITA - but overall it is always a good idea.
This isn't an investment house is it? This is a forever house................so all you need to worry about is, can you find it, can you afford it, can you get the mortgage........
the rest are worries for another day - I certainly wouldn't worry about LTV on a forever home. I'd worry about can you afford it
It'll go up, it'll go down, it'll cost money , it'll be a PITA - but overall it is always a good idea.
This isn't an investment house is it? This is a forever house................so all you need to worry about is, can you find it, can you afford it, can you get the mortgage........
the rest are worries for another day - I certainly wouldn't worry about LTV on a forever home. I'd worry about can you afford it
RacerMDR said:
it is stressful - but having done it loads of times.............just crack on.
It'll go up, it'll go down, it'll cost money , it'll be a PITA - but overall it is always a good idea.
This isn't an investment house is it? This is a forever house................so all you need to worry about is, can you find it, can you afford it, can you get the mortgage........
the rest are worries for another day - I certainly wouldn't worry about LTV on a forever home. I'd worry about can you afford it
Good points! The real deal breaker of course will be trying to convince the missus that it’s a good idea to be buying a house when we’re meant to be saving for the wedding It'll go up, it'll go down, it'll cost money , it'll be a PITA - but overall it is always a good idea.
This isn't an investment house is it? This is a forever house................so all you need to worry about is, can you find it, can you afford it, can you get the mortgage........
the rest are worries for another day - I certainly wouldn't worry about LTV on a forever home. I'd worry about can you afford it
BRISTOL86 said:
Good points! The real deal breaker of course will be trying to convince the missus that it’s a good idea to be buying a house when we’re meant to be saving for the wedding
ha ha that is an entirely other thread.............and I shall keep my very biased opinion to myself on what a waste of money a wedding is .........ooops 
You have been very thorough in your study, and even taken into account possible interest rate rises.
As interest rates have been held down for so many years, since the great debt boom crash 2007/2008, there must be many in the younger generation, who perhaps do not give much thought to the impact of mortgage rate increases.
With such low rates, an increase of say 3% might not sound much, but of course it could double a monthly mortgage payment.
I have only glanced at the details of your post, so apologies if I missed this.
Average property prices in relation to average incomes are now at levels never reached before.
In your assumption table, are you considering that this ratio will continue to stretch?
It is a very difficult conundrum now, and none of us know what is going to happen .
If the present property bubble does burst, then upper market homes will become more affordable, but equally, some home owners will find their current equity has been completely eliminated, whilst their mortgage payments have increased.
Exactly this has happened before, but it was along time ago (1990). There were many home repossessions that time, whereas this was avoided during the 2008 economic crash, because the historic low interest rates lowered mortgage payments and held employment levels.
You clearly want to consider every risk, so good on you.
What you should do, only you can decide, but good luck.
Edited by Jon39 on Tuesday 9th January 12:17
Just do it.
If it doesn't work out then sell, chances are, we won't see 6% interest rates for a long long time, and if we do, there will be a lot of people worse off than you so you can still carry on climbing the ladder.
i'm hoping to complete on another house in the next 5 weeks and we ended up £100k over our initial budget which works out at an extra £200 per month and 21% of take home.
The one thing I have seen over the years, is what I could have bought for the same money 2,3,5 10 years ago and regretting not going balls deep as soon as I split from my ex.
If it doesn't work out then sell, chances are, we won't see 6% interest rates for a long long time, and if we do, there will be a lot of people worse off than you so you can still carry on climbing the ladder.
i'm hoping to complete on another house in the next 5 weeks and we ended up £100k over our initial budget which works out at an extra £200 per month and 21% of take home.
The one thing I have seen over the years, is what I could have bought for the same money 2,3,5 10 years ago and regretting not going balls deep as soon as I split from my ex.
Impressive organisation OP. Wish i was that way inclined. I more of a live now kind of guy. Enjoy life as you never know when the clock will stop. I don't really worry about the future as i know it will take care of itself.
i.e. It means buy the forever home and be happy. Wish you luck in whatever you do.
i.e. It means buy the forever home and be happy. Wish you luck in whatever you do.
I don't think you mention kids anywhere, other than not currently having any.
Once married, maybe that will change - an what effect would that have on income (e.g going to part time work). Its not something I'd let colour the decision, but you seem to like to think of the detail so just thought id mention it. Remember, no plan survives contact with the enemy.
Oh, and I think phil and kirstey have a lot to answer for with all this "forever home" nonsense.
Once married, maybe that will change - an what effect would that have on income (e.g going to part time work). Its not something I'd let colour the decision, but you seem to like to think of the detail so just thought id mention it. Remember, no plan survives contact with the enemy.
Oh, and I think phil and kirstey have a lot to answer for with all this "forever home" nonsense.
BRISTOL86 said:
Thanks all for your thoughts.
The good news is that Lady B was much more receptive to the idea than I’d imagined. We’re going to get a couple of EAs out to value ours and then we can work out if we can actually afford to do it!
I know women like a good expensive wedding, but compared with a home there really shouldn't be any competition (note I said shouldn't, not wouldnt)The good news is that Lady B was much more receptive to the idea than I’d imagined. We’re going to get a couple of EAs out to value ours and then we can work out if we can actually afford to do it!
As I said earlier, buying now may be more short term pain but still better than leaving it 2-3 years and finding you then have to pay 100k more for the same house.
Not from the same perspectice, but as
an example I sold my london house for 550k in 2014. Its now worth 700k. There's no way most people could save up to make that difference- so buy asap. Personally I could get pissed off I didn't keep hold of it, but I bought it for 200k so plenty of profit anyway and the new house I bought has also gone up - not by 150k but by enough to make me happy.
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