Are we over stretching ourselves financially with house purchase?
My partner and I (both early 30s) have just had an offer accepted on what we hope is our "forever home" in a highly desirable area of our city in Wales.
The house is £527k but needs some internal structural renovation (no extensions) to bring it up to standard. My partner is worried about the sheer scale of the financial outlay and thinks we might be overstretching ourselves, especially as we plan to have a child in the near future. I’ve run the numbers and think we are ok, but we would love some advice.
Here is our financial breakdown:
Total joint savings: £242k (from a recent house sale + savings)
Purchase price: £527k
Deposit (15%): £79,050
Welsh Stamp Duty & Fees: ~£23,200
Renovation budget: ~£103,000 (maximum estimate for a knock-through, structural steel, plastering, full rewire and lighting, new kitchen, flooring, doors and windows, and loft work.
Cash buffer remaining: £36,750 (After the house is bought and the renovation is fully paid for).
Monthly income & outgoings
Joint net income (both civil/public servants): £7,314
New mortgage (Est. 5.36% on £448k): £2,388
House running costs (C.Tax, Utilities, etc): £500
Cars /transport (including a new PCP): £500
Food: £500
Gyms, leisure & holiday fund: £600
Personal items: (Clothes, haircuts, beauty etc): £400
Total monthly outgoings: £4,880
Estimated joint monthly surplus: £2,334
We'd like a baby soon but our biggest worry is the nursery years. We estimate that full-time childcare and baby consumables in our city will cost us around £1,558 a month.
If we drop that into our current budget, our monthly surplus shrinks to £776 (during the years before the Welsh Government funded childcare hours kick in).
My questions are:
Is a £36k cash buffer enough after a £100k renovation as an emergency fund? (Doesn't include some investments for retirement £~20k)
Does a £776 monthly surplus during the most expensive childcare years sound far too tight, or is it reasonable given that our budget already includes £1,100 of leisure/holiday/personal spending that we could cut back on?
Should we go for a smaller house now and expect to move again in a shorter time period?
Any advice would be hugely appreciated!