Mortgage Payment as % of Net Income

Gambler

We are thinking about moving but would need to take out a substantially larger mortgage to be able to get the move we want.

I was just wondering what people would see as comfortable for their mortgage payment.

Our mortgage payment was 18% of our net income per month, but has now gone up to 24% due to a new baby and mum going back to work part time.

Dont want to over stretch ourselves but would be interested in peoples thoughts

Thanks

P.S. I've used guaranteed income for the above figures and not included overtime which I normally earn.

tonydee

Your potential new percentage is close to what I pay at the moment. I would imagine alot of people and in particular younger people (1st time buyers) are in this prediciment due to the higher house prices. With interest rates relatively low it's appealing to borrow more too.

lightspeed

I think it is very difficult to put an exact figure on this. It was the same question i asked myself when we purchased our first house recently but quickly found that affordability for one person/couple can be vastly different from the next even if they earn the same income. There are too many variables such as location, liklihood of salary increases, lifestyle, smokers/non-smokers, regular socialisers, cars/furniture on finance, expensive taste, the need for 2 holidays a year etc...

Personally, i think below 25% should be comfortable for most. 25%- 35% is manageable but the closer you get to 35% there maybe the need for careful budgeting. 35%+ is risky teritory IMO and must require very strict money management and this would certainly make that person(s) very suseptable to IR increases.

I think that you need to work out the max you would realistically like to pay then consider the max that you could realistically afford and find somewhere between. Then calculate how this would fit in if IR's double in the next 5 years (very extreme i know). Affordability now is somewhat false due to historically low IR's, therefore, expect the unexpected.

If you enjoy going out, having expensive treats, luxuries on finance etc...i would always edge on the side of caution. If you are more often that not in control of your finances, then you will probably adapt to any % of your net income, within reason of course.

Hope that makes sense

silvercar

It is cheaper and less stressful to move once stright to the place you wantm than to take a stepping stone house to get there. Personally I would stretch your self now and reap the benefits later. Think how much you'll save in selling up and moving again.