Can we afford mortgage?

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mollyblue

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Joint income: 95,000. (This will increase to 99,000/100,000 by end of year)
Mortgage repayments: 1,800 pm (25 yrs)
Childcare: currently 700 pm but will increase in Dec when second child attends.(1100) However this is only payable for school days as we don't pay for school holidays.
Loans: None
Savings: 130,000.

Can we really afford this mortgage?
 
I think you may need to give more detail on this. What is the size of the mortgage and the interest rate?

Paying 100k off the mortgage from your savings would probably assist in both the short term and long term.

You could also use your savings to pay for childcare (1100 * 10 (school term only)) = 1100 * 4 years = 45k

lots of options, but think you need to work out what you spend your money on and what is affordable to you. From your initial high level figures I would say you have lots of options open to you
 
You haven't even told us what the mortgage amount is, nor the interest rate !

You obviously can afford it if you have been able to save 130k

The worst part of married life etc is the beginning, high mortgage, child care, most people struggle then. It's normal.
 
Oops! Ok here are the figures
Mortgage is 335,800
Interest 4.45%
Term 25 years

The bulk of the savings have been built up by mainly me over the past 10-12 years.
Mortgage is new one having recently moved so I suppose I'm just aghast at the lack of disposable income we will have and having to eat into those savings (though what are savings for if not for times like this?!) I feel like we have bitten off more than we can chew.
Bronte said:
The worst part of married life etc is the beginning, high mortgage, child care, most people struggle then. It's normal.
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Think you hit the nail on the head there Bronte.....only married a few years, toddler plus new born and worrying about how to manage it all. Glad to read from you that it's normal.

Should we put some savings into mortgage?
 
This is crazy stuff. The banking system must love you.

You have €130k in savings earning probably 0.5% less tax, while you are paying 4.45% interest on your borrowings.


If you pay the €130k off your mortgage, you will end up with a loan to value of around 60%, so you could reduce the rate to around 3.5% on the remainder.

The net interest today is €14,000 ([email protected]% - [email protected]%)

If you pay it off, you will end up with net interest of €8,000 (€220k @3.6%)

A saving of around €6,000 a year.

Brendan
 
New house needs a bit of work (new kitchen incl new floor&knock a wall,also minor furnishings/cosmetic work). So let's say 20,000 for that -I have already been given quote of 15,000 for kitchen work.
I am reluctant to put all our savings into mortgage-at this stage in our life do we not need some rainy day money?
Looking at your calculations though Brendan it seems to make sense to put a large sum of money into mortgage. Do people even have large savings in these times?

Brendan Burgess said:
This is crazy stuff. The banking system must love you.Brendan
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I'm sure they do as business/finance is not my forte....obviously!
 
While Brendan's calculations make sense, I'm a believer in having access to a reasonable level of savings. At times I've been guilty of holding too much in useless bank accounts earning no interest. That said I wouldn't put all my savings against the mortgage - I think it is important to hold some cash in case of unexpected bills, a job loss, the car packing in, the boiler quitting, paying for a summer holiday etc etc.

We're going to get some work done on a new-to-us house this year. Then we are sitting down to decide on what's proportion of our savings we'll hold as emergency money, what can be put into longer term investments for college etc & what we are going to pay off the mortgage.

In your case it would be worth sitting down & having a good discussion about what to do, bearing in mind you have a few expensive years ahead. You're in a fortunate position though.
 
Butter said:
While Brendan's calculations make sense, I'm a believer in having access to a reasonable level of savings. That said I wouldn't put all my savings against the mortgage - I think it is important to hold some cash in case of unexpected bills, a job loss, the car packing in, the boiler quitting, paying for a summer holiday etc etc.

.
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Agree with this excellent advice. Something like 3 to 6 months costs held back would probably do it. Not including the renovations.

Very strange you kept so much savings when purchasing a home when you could obviously have eased your credit worries.
 
I have been in the same position as the OP somewhat. If it were me, I would do nothing at the minute...or for the next few years.
It is important to keep some savings. When you have a young family - you need those holidays and the odd weekend hotel deal away if you can afford them they really help. Or a cleaner once a week. Babysitter occasionally etc.
In 5yrs time you can throw money into the mortgage. The younger children may all be in primary and the childcare cost might be reduced a little then.
If someone loses their job if you have the savings at least you have something. If its gone into the mortgage you can't get it back.
If your disposable income is not covering living expenses now then you can use savings to pay for Car insurances, Health insurance, etc so they can be taken off the monthly outgoings.
 
Don't put all of your money into the mortgage, keep some back for a rainy day. Manure happens as they say
Can you get a better mortgage rate elsewhere and can you use some of your savings to position yourself to get a better deal elsewhere. That may require you to get into positive equity..
 
Ok so consensus is to keep some savings. Butter, I like your advice, what to you is a reasonable level of savings?

Bronte, it may seem strange but we didn't even think of dipping substantially into savings when we applied for mortgage. We just ploughed ahead with getting paperwork done etc and decided that whatever mortgage was offered we'd try to find property that wouldn't use max amount which we managed to do. We did minimal number crunching, foolish I know and so unlike me but as I said in other thread I blame pregnancy at the time and illness....not to mention naivety.
TheDaddyman we are not in negative equity, sold previous house which cleared old mortgage and borrowed again for this house. Starting from scratch again as it were. Only have new mortgage a few months.

While move to location was good I must admit I'm already beginning to regret buying this house. :( Buy at speed repent at leisure.:(:( Trying to stay positive.;)
 
At the moment we have quite a bit of money sitting in a current account. (Brendan look away now!)
We moved two weeks ago & this house needs a complete overhaul & we're planning an extension too. We took out a mortgage with a bit of elasticity in it to get the work done & now have the extra plus our savings.
Once we start getting quotes in we'll figure out how much we want to spend & we're planning on putting the extra back against the mortgage.
Our plan is then to invest for five to eight years for college funds & keep 6 months joint salary as ready cash.
I hope it all pans out like I hope and I don't get a shock when the refurb quotes start coming in!
By the sounds of it we are about ten years ahead of you in terms of ages of the children so what might be right for us, may not be the same for you.

I do remember those extraordinarily expensive childcare years. With pain.

Why do you regret buying the house Mollyblue?
 
Butter said:
At the moment we have quite a bit of money sitting in a current account. (Brendan look away now!)
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Us too. When you find out where to make some money on it give us a shout. Not putting it against mortgage as my rate is cheap.
 
Regrets, hard to describe without long,off topic piece.
To be fair have to give it time to make it feel like ours.

Thanks for replies and advice everyone.
 
You'd be amazed at how off topic pieces can give us more of a back ground and a feel for what the issue is, I find those posts often have nuggets of information and insight into what is really going on. I moved house over here nearly 10 years ago for a couple of reasons (distance and commuting stress and a political local reason) and my OH was dead set against it, to a level of war, we were so bad the day we saw the house we bought we weren't even speaking ! And you know what, it was the best thing we ever did and my OH loves where we are as do I. If your gut feeling brought you to this house Mollyblue it will probably all work out.

Separately and about being off topic. It is exceedingly boring to me and no doubt to others if we just get the same old figures all the time. The posts that get the most responses are those with a bit of background, where you can get a feel for a real human being and their story.
 
Without presuming too much Mollyblue - I moved two weeks ago & without doubt it was stressful.
You have two young children, you've just moved & you've bought a house that needs work. It may feel a little overwhelming now but focus on the reasons why you wanted to move. It'll come good.
 
It does take a while to get used to a new house. You keep 'coming up against' the stuff you want to change - eg. stupid hotpress in the wrong place. No socket where there should be one. Some days it doesn't bother you other days it represents Everything That's Wrong About This House And My Whole Freaking Life. And then the portal to a hellish mood swing opens up :D.
Reality is that with a newborn and a toddler getting stuff done is nigh on impossible, so lowering your expectations of what's achievable. A trip to a DIY store is a gargantuan task (and that's even before you fall out over paint colours/new taps and the whole task overwhelms you). Enthusiasm and excitement over getting stuff done turns to despair and questioning your marriage (that's just after 5mins in the Dulux aisle). A lot of us have been there. They haven't invented a word that covers that frustration.
Ask yourself and OH 'what's my/your expectation regarding this kitchen/sitting room in the next 6 weeks/months' and write that list together so that realistic expectations are shared. Do the realistic expectations even for smaller daily goals and give yourself small concrete tasks that are achievable and put estimated times on them. Overall aim is 'creating a nice place for ourselves and our children that we enjoy living in'.
 
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