Cost of mortgage as a % of monthly take home

MrMajic

sarah_elton wrote: »

Depends largely on what your salary prospects are in the future. What is your likely career progression from here and what salary is achievable? If it's going to be 60% for the forseeable future then IMO that's too high.

My mortgage plus leasehold service charge was 44% of my take home when I first got it a few years ago, and that felt tight each month, although I was repaying some credit card debt from uni at the time.

Now, due to salary increases it's 25% which is lovely, and with OH moving in next month will be half that. Much happier now.

If you're in a career track where you should be earning more in the relatively short term (say three years) then it's not as bad as if you've reached about as high a salary as you're ever likely to earn (in real terms).

That's a fair point. I don't really see my earnings increasing significantly from here. We do have a flat that we can sell one day to reduce the mortgage on the house, and there's always the option of my wife working too.

minimike2

60% is too much IMO.

30%-45% would be more realistic.

koexelek

beecher wrote: »

I suppose it depends on how high your take home pay is and how much excess money you have at the moment.

Spot on.

If you were a professional footballer earning £320k per month, a 60% mortgage payment of £192k per month, would still give you £128k per month to live on ( making it easily do able)

However, if you were a factory worker earning £1k per month, and your mortgage was £600pm, you would probably struggle to get by on the remaining £400pm .

Extreme examples I know, but to most people 60% would be a bit of a crippler

sarah_elton

MrMajic wrote: »

That's a fair point. I don't really see my earnings increasing significantly from here. We do have a flat that we can sell one day to reduce the mortgage on the house, and there's always the option of my wife working too.

Yeah, mine aren't likely to go up any more the way they have been - I've reached the point where I don't have much interest in getting more senior - too many long hours and meetings involved.

Your wife may of course prefer one of those two options above the other.

As others have said, it does depend on the actual absolute figures involved. Do a realistic monthly budget for all your bills, food etc and see what you're going to be left with. If that's more than enough to have your pocket money each month, go on holidays you want, put some into savings, then 60% may still be affordable. If you're not going to be able to save anything for a rainy day, I'd say no.

Depends on how much you need/want the bigger house and how much you can sacrifice in terms of spending to live in it.

What I would recommend is using a mortgage calculator such as the one below to see what your repayments would change to if the interest rate increased. Fixed rate terms fly by worryingly fast (I've found with mine lol). If you do the budget exercise above, and can still afford it without getting into trouble if the rate rises by 3-5% then you should be OK.

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

simonts

Mine is 45% at the moment and I think that is too high, Look forward to my partner moving in and it should become 25% which will leave us with plenty of disposable

MrMajic

sarah_elton wrote: »

Yeah, mine aren't likely to go up any more the way they have been - I've reached the point where I don't have much interest in getting more senior - too many long hours and meetings involved.

Your wife may of course prefer one of those two options above the other.

As others have said, it does depend on the actual absolute figures involved. Do a realistic monthly budget for all your bills, food etc and see what you're going to be left with. If that's more than enough to have your pocket money each month, go on holidays you want, put some into savings, then 60% may still be affordable. If you're not going to be able to save anything for a rainy day, I'd say no.

Depends on how much you need/want the bigger house and how much you can sacrifice in terms of spending to live in it.

What I would recommend is using a mortgage calculator such as the one below to see what your repayments would change to if the interest rate increased. Fixed rate terms fly by worryingly fast (I've found with mine lol). If you do the budget exercise above, and can still afford it without getting into trouble if the rate rises by 3-5% then you should be OK.

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

Thanks, the budget calculations are exactly what we have done. I've been a little conservative with net pay, as I have the odd payment in addition to my regualar salary, but was really interested in what people thought of the % spend. I don't much fancy a 3-5% rate hike, so I'll look to fix for, say, 5 years and then could reduce the total owed when we remortgage at that time.

opinions4u

MrMajic wrote: »

You're quite right, a 5% rise would result in the cost being around 114% of my income. I'll look to avoid a 5% rise overnight.

They tend not to happen overnight.

But they do happen over time, and as you've stated yourself that your income prospects aren't likely to show significant increases I'd hate the 'slow burn' of economic changes through a long term mortgage to cost you your house.

But you obviously know better.

MrMajic

opinions4u wrote: »

They tend not to happen overnight.

But they do happen over time, and as you've stated yourself that your income prospects aren't likely to show significant increases I'd hate the 'slow burn' of economic changes through a long term mortgage to cost you your house.

But you obviously know better.

Me too. I've not included all of my income in the calculations. I may not know better (than the Bank of England) but I can make an informed decision.

Some interesting points from all of you. Thanks.

Gorgeous_George

It's too much, especially with a BTL mortgage to service.

GG

Ian_Griffiths_Halifax

I've always said 30% of a typical income, but depending on how secure the jobs are, up to 40% but include any other financial committments.