What multiple would you borrow?

Generali

LydiaJ wrote: »

We've heard that some lenders are limiting lending to 3.5x multiple of salary, but others are offering more. This website http://www.alexanderhall.co.uk/mortgages/mortgage-calculators/how-much-can-i-borrow.html even comes up with £108k if you type in one applicant with income of £18k - ie a multiple of 6x! :eek:

But if you were buying a house, what's the biggest multiple of your salary you would feel able to borrow without scarily over stretching yourself?

It depends on the situation.

If I was a newly qualified accountant or dentist who could expect his income to rise rapidly I'd feel differently to someone who can expect his income to rise at inflation plus a little

mewbie_2

In a falling market I would not want a mortgage that was as much as the rental equivalent for that property. After all you are losing money from day 1.

In a static market I would expect a mortgage the same as rental costs.

And if we ever return to a rising market then perhaps a small premium on the rental cost.

Plus of course no more than 3.5 times would be a sensible multiplier. As the world now knows, lending silly sums to silly people screws the financial system.

JonnyBravo

WhiteThierry wrote: »

i dont know wether the question means what is the max you'd borrow (4x for me) or what you're going to borrow (probably a little less than 3 after my deposit). but thats on only one income

I thought it meant max you'd borrow. Whilst as I stated I would go for over 5x if I wanted/had to, we actually owe less than 2x joint income.

WhiteThierry wrote: »

ive just checked out that if i got 5x even with a 20% deposit and with rates as low as they are currently i would be paying nearly half my disposable income to the mortgage, not to mention all the other bills. Each to their own but that is not a position i want to be in, id still like to have a life as well as a house. plus when interest rates inevitably go up, that mortgage would become unbearable. If you want a 5x income and you're prepared to make the sacrifices then fair play to you, but i wont have any sympathy for you when you're complaining you cant go on holiday, buy that new car, go to the pub etc etc.

But thats the point isnt it. It's not quite as black and white as that. On larger incomes it's easier to spend 50% of your income on your mortgage (we actually still do, as we're overpaying) and still be able to do the things you reckon you wouldn't be able to do on a 5x mortgage.
That's why what's right for one is not for another etc.
Ultimately as you say, each to their own.

LydiaJ

JonnyBravo wrote: »

But that's the problem with these type of polls, there is no accounting for other personal circumstances. ie I've voted that way bearing in mind I have a large income and some good savings.

I was originally just going to post it as a thread for people to discuss, and then I thought it might be interesting to add the poll. Obviously the poll is a massive over-simplification, but I'm still finding the answers interesting.

If you'd rather comment on a more specific situation, then I'd love to hear how much you'd borrow if you were me: FTB, late 30s, single parent, 2 kids, decent deposit, smallish salary (part time teacher) supplemented by both tax credits and maintenance from my ex.

Thanks to everyone who's answered so far.

ShelleyC_2

LydiaJ wrote: »

If you'd rather comment on a more specific situation, then I'd love to hear how much you'd borrow if you were me: FTB, late 30s, single parent, 2 kids, decent deposit, smallish salary (part time teacher) supplemented by both tax credits and maintenance from my ex.

On your situation I'd go with x3-3.5.

However I've voted x5+ on my circumstances. Although I'd do it for a truly fabby house I'd rather stick with 3-4. I vote more riskily for myself as I have no dependents, a good income and chunk of savings.

Harry_Powell

I've voted for 5x though I hope it won't come to that. I want to buy the most expensive, largest house that I can afford so that my girlfriend and I have the option of starting a family and won't have to move house.

I doubt we'll ever see a HPC like this again in my working lifetime so we intend making the most of it. IMHO there is no point in us buying a 2 bed house/apartment in the next couple of years and then paying a lot more for a larger place once HPI has taken off again. Instead we will take the maximum advantage we can.

This is a real opportunity for people to get ahead financially during the current HPC and we're going to make sure we don't miss out.

lostinrates

LydiaJ wrote: »

I was originally just going to post it as a thread for people to discuss, and then I thought it might be interesting to add the poll. Obviously the poll is a massive over-simplification, but I'm still finding the answers interesting.

If you'd rather comment on a more specific situation, then I'd love to hear how much you'd borrow if you were me: FTB, late 30s, single parent, 2 kids, decent deposit, smallish salary (part time teacher) supplemented by both tax credits and maintenance from my ex.

Thanks to everyone who's answered so far.

I'd borrow the very, very minimum. Not just for mortgage serviving -although thats improtant: bu for qality of life. Its fine for DH and I to have to limit spending money a little, we aren't going to outgrow clothes/shoes unpredictably, we don't need to eat the best available food for growing, we are able to make our entertainment, when pushed for free:D. Your children have those demands and needs all the time, and will inevitably rightfully be your financial priority. Your job is secure, your income from ex only our know how secure that could be. But my point is, sacrifices I might make for myself while married, I would NOT make while single and would not be easily able to make while a parent: so I would be prepared to devote less financially to the roof over my head.

JonnyBravo

LydiaJ wrote: »

I was originally just going to post it as a thread for people to discuss, and then I thought it might be interesting to add the poll. Obviously the poll is a massive over-simplification, but I'm still finding the answers interesting.

If you'd rather comment on a more specific situation, then I'd love to hear how much you'd borrow if you were me: FTB, late 30s, single parent, 2 kids, decent deposit, smallish salary (part time teacher) supplemented by both tax credits and maintenance from my ex.

Thanks to everyone who's answered so far.

I'd echo Shelley's thoughts and say prob about 3x as max, but this again is with some guesswork.
When are you intending to buy and will you want to move again?
The reason I ask is if prices continue to drop, (personally I reckon theres another 10% at least to come), will your deposit protect you from NE and still enable you to get your next house?

Also as lir asks... what about your maintenance? Is it from someone with a job at risk? Has there been any history of non-payment? These are things which should reduce the amount of risk (amount you borrow) you take.

JonnyBravo

Harry_Powell wrote: »

I doubt we'll ever see a HPC like this again in my working lifetime ....

Really? How old are you?
I wouldn't bet on it.

I'd agree with most of everything else you said though.

LydiaJ

JonnyBravo wrote: »

I'd echo Shelley's thoughts and say prob about 3x as max, but this again is with some guesswork.
When are you intending to buy and will you want to move again?
The reason I ask is if prices continue to drop, (personally I reckon theres another 10% at least to come), will your deposit protect you from NE and still enable you to get your next house?

Also as lir asks... what about your maintenance? Is it from someone with a job at risk? Has there been any history of non-payment? These are things which should reduce the amount of risk (amount you borrow) you take.

Probably not going to buy just yet - I think prices have further to fall too. I'm trying to weigh up the pros and cons of the timing because I think further falls may well not happen until after interest rates go up. It's all guesswork for any of us, though, isn't it?

Once I buy, I hope not to need to move again for years and years.

Maintenance is fairly secure - he's reliable about paying it, and in a public sector job that's secure for the moment but might be at risk if/when we have a change of government and the public sector gets slimmed down. He's considering a career change in the next few years that would put him in an even more secure but rather less well paid job, though.

My teaching job is not quite so secure - part timers are subject to changes in hours from year to year, and I work in the independent sector, so the recession could affect pupil numbers.

One reason for taking on more mortgage would be to get into the catchment of a better school.