What percentage of income is OK for mortgage

redrabbit29

I'm trying to work out what I can afford if I was to get a mortgage in the next year or so. What percentage of our income is OK to put towards the mortgage?

E.g. if we both earn say £1000 each, so a total of £2000 what amount is OK?

50%, 70%? I know this is not a "black and white" answer but just looking for some guidance as I am a potential FTB.

getmore4less

That depends what you spend money on.

do a SOA and see how much you have left
http://www.makesenseofcards.co.uk/soacalc.html

do one for now and one as if you were living in the house you bought

Don't foget the deposit you need to save that as well.

lowtidesurf

Well me and the Missis are getting our first house.

We earn £3000 combined and our mortgage is £550 at the moment. We are expecting it to rise as intrest-rates pick up and expect it to be £1000 max.

So I would say a third of your combined income.

SuzySu

I think I've read somewhere on here that if your mortgage is more than one third of your net income you are likely to get into difficulties. Of course there are other things to take into account, but it's a ball-park figure.

pinkshoes

It's more a case of what they'll lend you isn't it?

Lenders are restricting people to 3x their joint (before tax) salary I think.

Our mortgage is about 25% of our after tax salary.

amalis

ours is about 45% of our income

Fire_Fox

A half of your income including council tax and mortgage and you will likely be in trouble - if you go onto a variable rate bear in mind it went up to 12% in the eighties/ nineties. Also you need to consider how you'd pay the mortgage if one of you became long term sick, redundant or fell pregnant unexpectedly. If you are't used to all the costs of running your own home then be extra careful - FTBs tend to get carried away with new furniture on credit cards and Sky packages they can't service.

tek-monkey

My place will be approx 40% of my income after tax. Once I add all the other things like gas/electric/council tax/water/insurance/transport etc. it comes to more like 75%! Thats is absolutely all bills considered though, so still able to drink lots of beer and eat curries

puddy

we're going wrong somewhere then, our mortgage is only 560 but ourtake home is 3400. however we pay a total of about 1500 into our joint account so i suppose that makes it a third and you're right, we are struggling with that

redrabbit29

Some of you seem to be in a really good position with low mortgages and high incomes - very good! :-)

Anyway, my partner and I have a joint income of £3000 per month.

Broken down this means:
2 bedroom house in our area = £200'000 roughly and absolutely maximum - wouldn't pay this much probably
Our deposit = total of £30'000
Mortgage needed is £170'000

Monthly mortgage payments = £1108 - thats based on 6% interest rate over 25 years

Now obviously that's about a third of our income or just over it anyway. Doesn't include all the bills. Luckily we have no debts which is good.

Does that look OK to you guys. Interest rate of 6% may be a bit off, but not sure to be honest.

Thanks.

sarah_elton

The council tax and bills etc on a 2 bedroom property won't be that much, so if you've got the best part of £2k per month spare after the mortgage, you'll be fine I think.

We live in a two bed flat, so the heating will be a bit less than a house, but our bills (ex rent) come to about £500 per month (excluding food).

That's one thing to remember - the one third rule of thumb looks pretty different at different salaries.

Someone netting £1000 per month would have £666 left after spending a third on a mortgage. Someone netting £6000 a month would have £4000 left. Although bills on bigger properties are obviously higher, they don't necessarily go up proportionately (I guess the rule of thumb is also based on the typical lifestyle and day to day spending of people on salaries that different!).