What is sensible borrowing?

tegai1

We all know that many people have been taking mortgages out that in truth they cannot afford. My question is this, and I’m after opinion really as I suspect there is no true answer.
What’s classed as a sensible earnings to borrowing ratio?
If you want to use my situation as an example that would make things easier for me at least :j
Joint pre-tax income £85,000.
And in case you are wondering my current situation is that I have a Mortgage of £88,000 with an approx house price of £110,000. Clearly playing it safe, but as we're looking to move up the ladder at some point, I was wondering what my limit is if I was to keep playing it safe'ish.

StuTheDon

Hi,

I think most lenders as a rule now will count the primary earner's income at x 3.5 and the second income at x1.

So say for example, your salary is 50k and your partner's is 35k, you would be looking at a mortgage of £210k. Personally I think this would be about right for most people.

dwsjarcmcd

It is a difficult question to answer because although you have a joint income, we don't know your outgoings - credit card debt if any, car loans etc or the make up of your income e.g. bonus's.

As a general rule of thumb, I will start of by saying that around 2.5 times your joint income, so around £200 - £210k.

My thoughts only.

David

dwsjarcmcd

StuTheDon wrote: »

Hi,

I think most lenders as a rule now will count the primary earner's income at x 3.5 and the second income at x1.

So say for example, your salary is 50k and your partner's is 35k, you would be looking at a mortgage of £210k. Personally I think this would be about right for most people.

Great minds and all that, although a different way of getting there!

tegai1

Hi,
Thanks for your quick response. To answer: I have no loans or other debts.
I'm glad your thinking at the £210k mark as this is what I was thinking, although I’ve been tempted to stretch a bit further to £250-£300.

Winky,_The_House_Elf

It really depends on your personal circumstances!

What level of other debts do you have? What kind of other commitments? Any expensive hobbies?

How secure are your jobs? How quickly could you get re-employed if something happened?

Could you afford the payments on one income?

What if interest rates doubled? Would it be still viable in terms of the repayments?

How do you see the future? Do you have any children? Is maternity leave/one of you taking part time work something you need to consider?

This list is endless!

Personally, we have a simular income and we have just bought a nice semi that we can afford the repayments on just one income, so we can deal with the unforeseen circumstance (or children). We could afford a nice 4 bed detached, and had mortgage approval to that amount, but decided that quality of life was more important, and we enjoy having more disposable income each month, and its less stress.

Hope that helps

Winky

getmore4less

Affordability is very personal.
IF you like spending £12k a year on holidays and running expensive cars you can afford less than someone that makes do with cheaper holidays and bangers.

Do a SOA based on expected spends and long term commitments(cas,pensions etc) and see what you have left for a mortgage.

Factor in rate rises, loss of income etc. if you want to be on the safe side.

With £4700-£5200 take home pay a mortgage of £3kpm would be affordable.

£3kpm @5% 25y is over £500k so £250k would be a doddle at <£1500pm and only 9.5y at £3kpm

Mrs_Bumble

I agree with the above comments and in particular getmore4less and Winky the House Elf (love the handle lol!) affordability is very much a personal thing and you should factor in what your circumstances are going to be in the near and not so near distant future and so if you plan a trip of a lifetime, new car, children etc you need to be able to afford the new mortgage alongside the day to day living expenses and these circumstance changes.

Catanddogs

Hi
Our pre tax income is about £60,000.

We have a mortgage of £153,500. We don't have any other loans or significant debts, however this is more that enough for us I don't intend to rack up a massive mortgage that will take 25-30 yrs to pay off. Thankfully this is our forever house we won't need anymore space.

getmore4less

Ben_Hur wrote: »

On that kind of salary and in these market conditions, I'd go with 1.5x joint max.

£85k *1.5 , £127.5k @ 5% £3kpm

They would pay it off in 47 months that would be overly risk adverse.