33k salary, can I afford a mortgage?

getmore4less

brit1234 wrote: »

:eek::eek::eek::eek::eek:

Wasn't it thinking like that got us in the credit crunch in the 1st place.

Multiples of salary are important especially with government funding for banks ending this year and next. This is important as you need to position yourself for a remortgage when funds will be a lot shorter and mortgage restrictions tighter.

Also look at interest rates rising as well into figures.

Personally look at getting a deal for no more that 4 times salary. As prices fall and you borrow more than this you can be eaisly caught in negative equity.

People who talk about salaries not being important and talk of affordability usally increasing risk dramatically for the borrower.

It was lending to people that could not afford the mortgages
salary multiple had more to do with it at the low salary end more than the high end.

125% ltv loans, 30y+ terms, interest only, self cert
In the US it was worse loans to people with no income.


If you factor in the risks then some can go over 4* comfortably.

Once you earn over around £20k which is enough to live OK, the rest can all be directed at property if you wanted

By restricting lending to the higher earner they just end up moving sooner since they can pay off the loan that much quicker. when they could have been lent a bit more to save a move and lots of money.

Look at the numbers.
£20k take home £1300.
4* is £80k @ 5% 20y £528 which is stretching £772 left

Struggles to buy a place they want
rate rise and struggle to pay the mortgage
Not much room for any overpayments
prices drop can't move(uless a very big deposit)
takes 7 years 2 months to get the mortgage down to 3*(£60k)

£40k take home £2400
4* is £160k @ 5% 20y £1056 which is comfortable. £1344 left.
if you allocate 1/2 the extra surplus(£1344-£772) £286 to the mortgage.
the mortgage is paid off in less than 14years.

can take rate rises easly
overpaying
reduced exposure to price drops
takes 4years 5months to get to 3* £120k


Have the same standard of living, say an extra £100 for bills that give £472 mortgage is paid off in 11.5 years.

Stick in a lodger say £300pm less £75 for the bills and extra council tax

Now the mortgage is paid off in less than 10 year.

getmore4less

bodmil wrote: »

In the area I'm buying in a swanky 2 bed flat is the same price as a 3-4 bed family house, so there's no need for me to take out a larger mortgage to get extra rooms for lodgers. But should I take out more and get a better place or buy in a nicer area if it means going up to 4 times my salary, with regard to investment potential? I'm rather thinking of borrowing as little as possible to live in a place that'll do and getting it paid off as quick as I can so I've got a good amount behind me for a forever house.

If going down the stepping stone to the forever place you might be better staying as is and just saving loads rather than buying the small place, this reduces the risks of job moves.

Another good measure is the rental yield, if the yield is low then you take on the risk that if you need to relocate rental will not be an option so you have to sell and have no control over timing.

Have a look at those flats what do they rent for whats the gross yield?

One issue with flats in towns that did not have then traditionaly(london, and others) is that over time they will lose relative value the areas get grotty, also look at the parking this is the one thing that people start to hate as they get older couples tend to have 2 cars so parking gets overcrouded.

one estate near us was built like old vicotian streets cars everywhere no off road parking.

Good family homes in good areas(schools) are always in demand.
Off roasd parking garage and gardens.
But a house that is bigger than you need will cost more to run than a smaller place do you want to be doing a garden.

Another handy thing about a house that is a bit bigger is when you partner up it reduces the need to move(allthough there can be the it's not mine we need to buy a place together issue).

If going down the share route I would look at the bigger places
How much more would 1 lodger let you borrow,
2 lodgers and you will go over the rent a room so knock of 20% for tax.

Nice big houses with more space can get higher rents from a lodger.


Forgot to ask earlier, how much is home time how much is work expenced?

bodmil

If I rent out a room in a flat I could get maybe £450 a month, in a house probably £300 per room. Parking is a big issue in the town I live, even family houses have permits for on road parking. I suspect a driveway would be a very valuable asset, must look into that.

I'm away from home 6-7 months a year usually, now about 8-9 that I'm working over-time. So it's reeeeally not worth my while renting and I can't carrying on living at home longer than is absolutely necessary! It works great for saving up but it's not a long term solution. The forever place is a nice idea but it's not on the cards for the next few years.

getmore4less

Is the time away in long stretches or spread out?

UK or overseas?

Could you increase it to not need a place at all

Is this likely to continue?

bodmil

Away between 1-12 weeks at a time, no I definitely can't work 12 months a year as every day away is 12-14 hours work! And it'll continue until I'm 65 I expect!

bodmil

And it's mostly abroad, I'm working on my tax situation too.

getmore4less

Sounds a bit tough, do you get the weekends off when away?

With those sort of hours I would be looking for some TOIL specialy if travel is on your own time/weekends.

My thinking is that whoever is in your house might start to think it is their own. Certainly they will get a good deal with you away such a lot.

Any way to be based outside the UK in you normal work time.

Another angle might be to look at some where bigger and better with your family perhaps with more self contained space for yourself. This has its own and different issues.

bodmil

No weekends off. Sorry if it's obvious, what's TOIL? I'm really hoping to get a mate or two living with me, otherwise yeah the lodger will get a good deal, I hope to reflect the situation in rent and share of the bills!
The family house is huge, no problem there, I just don't like where my family live and I need to get out on my own, but in the most financially sound way possible.

bodmil

Oooh, time off in lieu? No, it's not really like that. I don't have any issues with my employment, just house buying.:)

getmore4less

Time Of In Lieu. to compensate for excess hours/days

Have you totalled up your hours including travel you will be heading down towards min wage.