Whats Normal?

kriss_boy

In a typical non Edinburgh/Glasgow town in scotland you can get a beaufitul house for 200K.

300K gets you a nice detached stone built house that would otherwise cost 1M in the centre of Edinburgh.

My question is what is a normal amount to borrow?

My girlfriend and I are both 25. Our combined income is 40K but we are on progressive payscales that go up to a combined salary of about 54K over the next 5 years (if we dont loose our jobs!)

What would be a sensible amount to borrow?

Our current small semi only cost us 80K. I just wondered what would be an acceptable amount to borrow because on paper 170K over 30 years seems affordable. At an 8% int rate its £1250.

Or is 50% of your aftertax income going on a mortgage a bit much?

Yorkie1

I think I recall reading on another thread that max of 1/3 net income on mortgage payments was recommended, but can't find that thread now so may be mis-remembering.

I certainly wouldn't want to pay 50% of my net salary now, when interest rates are relatively low.

sequin123

Hi

I asked a similar question on here and was advised to aim to not exceed around 33% of your net income.

I have since gone on this is money and they say between 30-40% max of income.

Not sure if of any help but thought I would reply.

Good luck

JonnyBravo

Using a set proportion of your salary as a guide isn't such a good idea.
If you earn a large amount the %age can be higher.
We have no idea of your outgoings. Do you have kids, or will you have them over the next 5 years? Expensive hobbies? Other debts? etc etc

What's better is for you to draw up your budget to work out how much spare you currently have each month. Then work out how much of that will be taken up by your increased lending. Then add in some interest rate rises etc.
Lots to consider and you'll get no meaningful answer without much more detail from you.

Thrugelmir

There is more to life than spending 30 years of your life paying off a mortgage.

Personally I would suggest that you buy what you can afford over a 25 year term.

On the figures you quote you'll be paying around £275,000 of interest to buy your dream property.

kriss_boy

Thrugelmir wrote: »

There is more to life than spending 30 years of your life paying off a mortgage.

Personally I would suggest that you buy what you can afford over a 25 year term.

On the figures you quote you'll be paying around £275,000 of interest to buy your dream property.

I agree to an extend but the same could be said about people who paid 40K for a mansion in 1970 for it now to be worth 700K.

I think as well its the lifestyle a property like that would bring. Sure, beans on toast for lunch for a few years but long term its a great family home near the only decent park and school in town.

Are outgoings arent that high, no fancy cars with finance or anything like that. No real debt to speak of.

The fact that we would have little equity in a place of that value and hence pay an obsene amount of interest is the logical reason not to do it. That and job security.

If it hadnt been for buying two used cars and going to Australia last year, we could have otherwise paid off 10K of our mortgage. In theory therefore we should be able to pay off about 8K of our mortgage a year (at the current int rates.)

Thrugelmir

kriss_boy wrote: »

I agree to an extend but the same could be said about people who paid 40K for a mansion in 1970 for it now to be worth 700K.

You need to put wages into perspective. If you could afford a £40k house then , you were wealthy!

kriss_boy

Well at present our mortgage is only 4% of our after tax income. At an interest rate of 7% its 20% of our monthly income.

Arent mortgages most expensive when you first get them, I mean even 5 years of wage inflation would lower the proportion of our take home monthly income notably.

I guess Im trying to predict how affordable a big mortgage be in year 4,5, 6 etc.

To see how beneficial it would be to live frugally for a few years in order to get our dream home while we are both still relatively young.