Mortgage & potential move, too cautious or not?
Discussion
Me and the other half have been toying with the idea of moving house but we can’t decide on whether we’re being too cautious with our current situation or if we’re going to be flying to close to the sun with what we want.
Financially staying put would always make more sense, but on the other hand we don’t want to get 20 years down the line and look back regretting not making the move.
I just wondered if anyone a bit older than us had gone one way or the other and what their thoughts were? Other people’s hindsight could help us massively.
I’ll put a few numbers down just to give some perspective on our position.
I’m 37, and the Mrs 32. No kids, and unfortunately that’s probably quite unlikely.
I work as a contractor and over the last 10 years or so have typically had an annual pre tax income of about £65k +/- 10%. The Mrs has a full time staff job with £27k basic, plus a bit of overtime taking it to approx £30k
We’ve currently got around £140k owed on a £230k property with 25 years to go on the current mortage. It’s a 5 bed detached in a nicer part of a town, that I’d class as “ok” in the North East.
We currently overpay about 35% of our basic monthly payment.
I’ve got about £40k sat in a stocks and shares ISA that I contribute about £1000 to each month. This is eventually going to fund my retirement, but it also serves as an emergency pot should we find ourselves both out of work. It doesn’t get touched for anything else.
Mrs has a good pension scheme at work, and all of the other benefits such as life insurance etc.
Mrs has about £4k left on a personal loan for her car, that’s worth about the same amount. Although she’s got some shares in a work scheme that mature soon that she plans on using to pay off the loan.
I’ve got about £15k outstanding on a loan for a car that WBAC offered £20k for.
We’ve got no credit card debt, or finance on anything else.
Any money we have left tends to go on fun stuff, or towards replacing things that are knackered around the house as and when.
The houses we like are typically in the £350-£450k range.
Essentially we want to move to a much better area (village etc) rather than up size, so the new house would likely be the same size or a little smaller than what we have now.
So I’ve made the assumption that all of the other monthly bills would stay about the same.
Thanks.
Financially staying put would always make more sense, but on the other hand we don’t want to get 20 years down the line and look back regretting not making the move.
I just wondered if anyone a bit older than us had gone one way or the other and what their thoughts were? Other people’s hindsight could help us massively.
I’ll put a few numbers down just to give some perspective on our position.
I’m 37, and the Mrs 32. No kids, and unfortunately that’s probably quite unlikely.
I work as a contractor and over the last 10 years or so have typically had an annual pre tax income of about £65k +/- 10%. The Mrs has a full time staff job with £27k basic, plus a bit of overtime taking it to approx £30k
We’ve currently got around £140k owed on a £230k property with 25 years to go on the current mortage. It’s a 5 bed detached in a nicer part of a town, that I’d class as “ok” in the North East.
We currently overpay about 35% of our basic monthly payment.
I’ve got about £40k sat in a stocks and shares ISA that I contribute about £1000 to each month. This is eventually going to fund my retirement, but it also serves as an emergency pot should we find ourselves both out of work. It doesn’t get touched for anything else.
Mrs has a good pension scheme at work, and all of the other benefits such as life insurance etc.
Mrs has about £4k left on a personal loan for her car, that’s worth about the same amount. Although she’s got some shares in a work scheme that mature soon that she plans on using to pay off the loan.
I’ve got about £15k outstanding on a loan for a car that WBAC offered £20k for.
We’ve got no credit card debt, or finance on anything else.
Any money we have left tends to go on fun stuff, or towards replacing things that are knackered around the house as and when.
The houses we like are typically in the £350-£450k range.
Essentially we want to move to a much better area (village etc) rather than up size, so the new house would likely be the same size or a little smaller than what we have now.
So I’ve made the assumption that all of the other monthly bills would stay about the same.
Thanks.
Hi thanks for your response.
When you said that I’m not balanced please could you expand on that, as I don’t quite grasp what you mean?
You’re about right on the income estimate
I wouldn’t be willing to sacrifice the ISA payment as I’m aware that I’m playing catch up a bit with the retirement fund.
As for work income, the Mrs’ is likely to go up as she’s doing quite well at climbing the ladder in her job. As I’m a contractor it’s highly unlikely that my income will increase due to promotion.
When you said that I’m not balanced please could you expand on that, as I don’t quite grasp what you mean?
You’re about right on the income estimate
I wouldn’t be willing to sacrifice the ISA payment as I’m aware that I’m playing catch up a bit with the retirement fund.
As for work income, the Mrs’ is likely to go up as she’s doing quite well at climbing the ladder in her job. As I’m a contractor it’s highly unlikely that my income will increase due to promotion.
If you really want a "better" place to live then go for it - you'll get a kick out of it every day of your life. In comparison, there's very little satisfaction to be gained by staring at an investment report.
Your main residence will never produce an income but all capital growth is tax free. You should get more capital gain than on your current house if you take a bigger mortgage and interest rates remain low compared with house price rises.
Just keep in mind one vital consequence - namely that you may be forced to "downsize" when you retire or otherwise stop work. Make sure you buy something that will be easy to sell if/when circumstances change. And never forget that was your plan from the outset.
Your main residence will never produce an income but all capital growth is tax free. You should get more capital gain than on your current house if you take a bigger mortgage and interest rates remain low compared with house price rises.
Just keep in mind one vital consequence - namely that you may be forced to "downsize" when you retire or otherwise stop work. Make sure you buy something that will be easy to sell if/when circumstances change. And never forget that was your plan from the outset.
Hi
Hindsight is a wonderful thing.... to give some context I am 44, wife is 43.
We have purchased three properties, once forced when moving jobs and then (about ten years ago) we bought our 'ideal' property. No regrets at all, only that we could have pushed ourselves a little further financially (we didn't realise interest rates were going to do what they have done!)
Now, we are nearing paying off the mortgage (in about four years), have two kids and are trying to balance mortgage overpayments, pension payments and having fun. For the time being, nice cars have taken a backseat......
At the end of the day it is about balance...don't kill yourself for a nice house that you then cannot have holidays/ luxuries or a decent financial future.
So my advice is go for the house at £350k not £450k!
Mike
Hindsight is a wonderful thing.... to give some context I am 44, wife is 43.
We have purchased three properties, once forced when moving jobs and then (about ten years ago) we bought our 'ideal' property. No regrets at all, only that we could have pushed ourselves a little further financially (we didn't realise interest rates were going to do what they have done!)
Now, we are nearing paying off the mortgage (in about four years), have two kids and are trying to balance mortgage overpayments, pension payments and having fun. For the time being, nice cars have taken a backseat......
At the end of the day it is about balance...don't kill yourself for a nice house that you then cannot have holidays/ luxuries or a decent financial future.
So my advice is go for the house at £350k not £450k!
Mike
brickwall said:
As it's £40k, £12k per year will land you at approx £685k in the pot at age 67, which'd give an income of ~£27,500.
So it is enough. No higher rate tax, no mortgage payment, no £1k into pension.then there us your partner's pension, and anything the govt may still be handing out. For context, we earn about 5-10k less than you and paid £350k for our small house in a nice area. We live comfortably but no luxury purchases but we have 3 kids that cost a fortune to run!
We are happy we stretched ourselves as the benefits of living in a nicer place (good schools, no chavs, village community) are worth it.
Go Compare said:
I wouldn’t be willing to sacrifice the ISA payment as I’m aware that I’m playing catch up a bit with the retirement fund.
Take advice, but you’re missing out on the tax relief that a SIPP or some other kind of pension would give you. Especially if you’re paying 40%.I regret not pushing the boat out more when we bought our house. The figures seem almost laughable now but ours cost a very comfortable for us £35K, but that was only me working and wife at home with two small kids. The next step up was £45K and just seemed too much. Of course we didn’t know prices were going to take off like they did.
At present we are in an unusual economic situation, particularly involving the UK housing market.
Interest rates are at a 250 year low.
Many younger home buyers have only known these low interest rates, and perhaps will be shocked if historic average rates return.
The ratio for first time buyers, between average incomes and average house prices is at a very high level (of course this varies in different areas).
If I were you, and assuming that your employment should remain stable during an economic downturn, I might wait to see if a market shock occurs. A significant interest rate increase will shake up the housing market. If prices do reduce, it will then cost you less to move up to a more expensive property. Say it might you cost 30% more, if prices decline, then that 30% in Pounds will be less.
It is all guess work of course, but the scenario that I outline could happen again, as it did in the 1990 downturn. On that occasion it was quite grim, with many repossessions, but for those in steady employment, and who could cope with high interest rates, it did turn out to be a very good time to buy.
As a contractor you should save for your retirement via a pension. Chances are you could put the money into the same funds as your ISA but just in a pension wrapper. The advantage for you is that you'll pay no tax or NI on the contributions, and when I say no NI I mean no employers and no employees contributions. I'll let you figure out how much that will save you each year.
Thanks everyone!
I am aware that I need to set up an actual pension, the avoidance of doing so was mainly because of the dual purpose of the money I have sitting in a S&S ISA. I wanted to have a decent amount to fall back on in an employment emergency, but when I reached a reasonable amount I felt as if it wasn’t enough and kept going. I guess I’m at the point now where that pot is as big as it needs to be. I’ll start looking into getting a pension set up ASAP.
With regard to the house, still unsure. We think we’ll sit on it for another year or so and see if we still have the urge for the better house.
I am aware that I need to set up an actual pension, the avoidance of doing so was mainly because of the dual purpose of the money I have sitting in a S&S ISA. I wanted to have a decent amount to fall back on in an employment emergency, but when I reached a reasonable amount I felt as if it wasn’t enough and kept going. I guess I’m at the point now where that pot is as big as it needs to be. I’ll start looking into getting a pension set up ASAP.
With regard to the house, still unsure. We think we’ll sit on it for another year or so and see if we still have the urge for the better house.
jonny996 said:
Go big or go home, I'm slightly older, not much, slightly higher income but again not much & sitting in a £800k house with £100k mortgage & it's not down to my earnings, all down to property growth
Property prices are starting to stagnate in a lot of the country and even fall in some parts though, quite a few regions if you take into account inflation. Any further rate rise will only add to that. Gone are the days of selling a house for multiples of what you paid for it.Personally I’d not rush into anything at the moment. We bought 3 years ago and I’m glad we didn’t go all in, we’re now sat with a very low rate fix with a decent LTV and a property that would be very easy to shift. We bought at 3x combined and our outstanding mortgage is now roughly twice our combined gross income, the security and disposable income afforded by that is invaluable. Only you can decide what’s right for your family though.
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