Am I overstretching myself?

h13odg

We've seen our long term dream house but could do with some advice/opinion on whether I could be overstretching myself to buy it.

Basically the mortgage would be 65% of my net monthly salary and I reckon I'd have about £800 a month to live off after all bills / monthly commitments.

I live in the north of England with my wife and 22 month old daughter.

How does that sound?

Would welcome any thoughts.

Thanks

opinions4u

So if rates doubled your mortgage payment would be more than your salary.

Madness to take this on.

CarineG

I think you would be overstretching by a lot.
My mortgage is 41% of my net income and I am struggling as it is. I live on my own and have to children.

You need to budget all your expenses before you make a decision.

LeeSouthEast

Crazy to take this on. Living expenses should not be more than 1/3 of your net take home.

madison-nyc

h13odg wrote: »

We've seen our long term dream house but could do with some advice/opinion on whether I could be overstretching myself to buy it.

Basically the mortgage would be 65% of my net monthly salary and I reckon I'd have about £800 a month to live off after all bills / monthly commitments.

I live in the north of England with my wife and 22 month old daughter.

How does that sound?

Would welcome any thoughts.

Thanks

£800 left after all bills sounds a lot to me , certainly a lot more than i have! lol. If i were you i'd just make sure the mortgage is a fixed rate so you know your payments are going to be stable for 3-5 years.

patchwork_cat

It does depend on your income, eg 50 % of £10K would leave £416 a month to live on, but 50 % of £50K would leave £2085 to live on. IYKWIM. On the face of it 65 % is a large amount of salary, but it depends on job prospects, fixed rate, whether partner works and intends to continue or return - are you frugal or live up to your income? How much do you spend on living costs at the moment?

We did it for less, however I worked out that we should sell up and move into rented and we would have more disposable income! It was a struggle and I am very relieved that mortgage has gone down and OH has been promoted. Now managing on £1255 for 4 after all bills etc.

opinions4u

patchwork_cat wrote: »

It does depend on your income, eg 50 % of £10K would leave £416 a month to live on, but 50 % of £50K would leave £2085 to live on. IYKWIM. On the face of it 65 % is a large amount of salary, but it depends on job prospects, fixed rate, whether partner works and intends to continue or return - are you frugal or live up to your income? How much do you spend on living costs at the moment?

We did it for less, however I worked out that we should sell up and move into rented and we would have more disposable income! It was a struggle and I am very relieved that mortgage has gone down and OH has been promoted. Now managing on £1255 for 4 after all bills etc.

It's less complex than that for this specific case.

If the rate is 5% and it takes up 65% of your income, how would you make the payment if the rate rose to 10%?

The BBC mortgage calulator is a useful tool for consideration of what payments will be when rates jump. Many paid 15.4% within the terms of their current mortgage.

dunstonh

The long term average mortgage rate is around 7.5%. Mortgage rates are currently at all time lows. So, if you were take on a struggle now, just think what it will be if interest rates were half as much again, and they would still be classed as below average. Think double current rates as what is possible and probable at some point in your mortgage term.

h13odg

Thanks for all the replies. Mostly as I expected!

In working out the numbers I've assumed getting at last a 5yr but probably more likely 10yr fixed rate so that I could effectively budget and be protected if rates suddenly doubled like somebody pointed out.

Having looked at my expenditure over the past few months we should be able to manage on the £800. Things like fuel are ok as I luckily have a fully expensed company car. I also get upto a 35% annual bonus but I've completely left that out of my calculations to make sure I could afford everything based on my basic salary. In the last 3yrs the bonus has paid out 21-28% so pretty good.

Would anyone change their view if I was to take out a 10yr fixed rate? I guess the million dollar question is even then is what will interest rates be at in 10yrs?

Thanks

LeeSouthEast

I think the more important question is what is your employment situation likely to be in 10 years time, if you fix? Are you on a career ladder? Will your take home pay be considerably higher in 10 years time? Are you in an industry with less than stable footings at the moment?

What is worth more to you. The house of your dreams that could quickly turn into the house of your nightmares, or financial stability?

patchwork_cat

opinions4u wrote: »

It's less complex than that for this specific case.

If the rate is 5% and it takes up 65% of your income, how would you make the payment if the rate rose to 10%?

The BBC mortgage calulator is a useful tool for consideration of what payments will be when rates jump. Many paid 15.4% within the terms of their current mortgage.

That is why I asked the OP about fixed rate! Having been a home owner for over 22 years I am well aware of how mortgage rates can become phenomenal!! But I demonstrated that % of income is not useful in determining affordability.

We know nothing about the OP, his prospects, his life style, his wish to potentially have a second child I could go on, it is a decision only the OP and family can make.