House buying decision - Are we being idiots?
Hey everyone, grateful for your thoughts on this one. Apologies for length but thought it best to give more information for general consideration.
Quick breakdown of me:
- 36M, married,
- 1 child (2.5 years old, nursery 3x per week) and 1 on the way very soon.
- HHI is £230k without bonuses, and this reflects my wife being on reduced hours (hence why only 3 days nursery). If she was back full time, HHI would be ~£272k without bonuses.
- Bonuses would generally be modest, £10-20k. I also have equity in my employer. All going well that might equate to £150-200k after a successful sale in 12-18mo.
- We Salary Sac on pension and an EV car to both get below £100k
- Our joint net worth is just over £900k:
- £110k ISA
- £450k Pension
- £330k Home equity / deposit
- £10k Cash
- We tend to live relatively modestly overall, but certainly not FIRE. We spend on good quality food, looking after our home and our kids.
We currently live in the South East and have sold our home. We have about £330k as a deposit for next house.
We plan to move to Lincolnshire to be nearer parents for support with children. There's a house we've sort of fallen in love with. For context, we've sold our current house for just under £700k and we're attempting to buy the new house for just under £1.1m
Our current mortgage balance is about £357k, @ 3.95% until 2030, which we'd port.
After SDLT our deposit for new house will be c. £280k / 75% LTV. Rates at the moment appear to be around 4.80%, which we do find eye watering.
Mortgage would go from being £1.9k today, to £3.7k if I pulled out the stops and put it all on a 35 year term.
A potential offset to the mortgage situation is that the target house has a separate 3 bedroom converted barn on the plot that we think could generate airbnb income, as the village is very chocolate boxy, etc.
The main / only thing that scares us with this prospect is taking on a £800k+ mortgage, with interest rates being where they are now (and the risk of what the future could hold). I find a lot of posters here to be "hyper rational" and would be unlikely to ever put so much into a house, but we are homey people.
Tl;dr: Is taking on a c. £800k mortgage with a HHI (post salary sac) of £200k absolutely bonkers, even with the potential of offsetting some of that cost with airbnb revenue