What size mortgages do people have these days?

Motivatedworkingmum · 15 August 2010 at 10:59PM

Hi

My partner and I are looking to move. We don't know whether to really go for the 'forever house' of our dreams ( = very large mortgage) or go for something more modest (= very manageble mortgage). We view a mortgage as a debt and so, want to clear it as quick as possible, have it over the shortest term and not go 'over our means' (although this view would change if we had the forever house).

However, we are questioning our view of what a 'large mortgage' is?

We are interested to find out what mortages people have nowadays? So if you don't mind me asking how much mortage do you have, over what term, whats your age and what is your mortage payment as a proportion of your monthly income?

Sorry for the number of questions but just really keen to see whats the norm these days?

Thanks in advance.

LilacPixie · 15 August 2010 at 11:21PM

we are having similar thoughts. we could get something modest/ functional for about 130k but the style/size/ area we want its closer 200k. My thoughts are any more than 3 times joint income is a large and scary mortgage

haras_nosirrah · 15 August 2010 at 11:28PM

Ok to answer your questions

fiance and I earn about 55k between us (but are in commission based so basics are 37k between us)

Mortgage is 120k

83k is over 25 years (at 3.03%) which was the original ported mortgage
37k is over 11 years (4.28%) which was the top up when we moved.

Mortgage payment is £750 as we decided this was affordable and we wanted to pay it off as quick as we could so 31% of basic salary and 22% of typical salary.

I am 27 and fiance is 33

SJ1 · 15 August 2010 at 11:38PM

Hi there

I can't tell you what to do but I can tell you what I did.

I used the two and a half times income as a guide to how much I should borrow. So if you earn £50k then you should borrow about £125k plus any equity you expect to take with you from your old house this should get you to what your house budget should be. Lenders are being stricter about this, we nearly ended up having to delay a big extension as a lender who shall remain nameless would only lend us two times salary at one point and refused to take my salary into account as I am a temp. It worked out but only just! I also checked that the repayment would be less than 30% of our take home pay - our mortgage is 22% of our take home pay.

The other thing I would do is write down your outgoings, things you have to pay out with money which is coming in and see how much is left over in each calculation. Its then worth having a look at how much you are actually spending each month - go through last bank statements - to check if that would be enough to cover you. It might be ok if you have a 'normal' month but if the car needs repairing would you still be ok?

On length of term we decided to go for 25 years as economic times are uncertain and I didn't want to go for 20 years and then regret it if one of us lost our jobs. I think the key is here not to overstretch yourselves but most mortgages allow you to overpay so we intend to do that. We are mid thirties but if we pay off a further £500 per month the mortgage term goes down to 16 years rather than 25. There is a calculator somewhere on the debt free wanabee pages if you are interested.

Lastly make sure if you are going to stretch yourselves that you think about what type of mortgage you are going for. We stretched ourselves a bit so I went for five year fixed last year. Yes, we are paying more at the moment than a lot of people but I wanted the certainty and at some point rates are going to go up. On a £200,000 mortgage a rate rise of 2% would cost you an additional £333 per month. I wasn't prepared to take that risk even though it would be nice to be saving all that money at the moment!

Good luck.

SJ

Motivatedworkingmum · 15 August 2010 at 11:45PM

Snap! For about £130/£140 k we can get 'something we can do something with', for £175k we can get the forever home. We are naturally cautious people but see friends and family moving on and 'going for it'. Its not keeping up with the Jones at all, but today have questioned what kind of mortages people have nowadays. We carped ourselves buying our first house for £44k. This is the last move so want it to be right. We view mortgages as debt and therefore don't want to put ourselves in a difficult situation. How far do you go? I agree that anything 3 times joints income is a bit scary, but based on the fact that your circumstances change and incomes increase do you go for it based on that?

PS - I posted on this thread as I see mortgage as debt but please move if more appropriate on another thread. Apologies in advance.

haras_nosirrah · 15 August 2010 at 11:52PM

I think it depends how soon you plan on moving

If you are looking at a house for the next couple of years or the forever house then I would go for the bigger one as if it costs 10k to move you don't want to do that too soon

If the smaller one will last you say 7 years then maybe go for the smaller one, overpay to increase your equity so you don't need to stretch too far for the forever house next time round.

We have done this. In the village where we have bought our house they start at about 180k and then jump to 250k with very little in between. We have gone for the 180k as we plan on having a family in the next couple of years and don't want to be too stretched as I earn more money than my future husband. We figure this is the 10 year house so are happy to make the bigger move later.

Motivatedworkingmum · 16 August 2010 at 12:07AM

Thanks Haras and SJ1 for your comments. The payments would work out at 32% of our take home pay (that includes overtime too which is pretty much all the time). Having been so cautious all this time, to then push the boat out feels scary. Agreed that a fixed rate is best for security. Decisions, decisions.....I suppose 'the debt' just has to feel manageble otherwise it becomes 'a noose around your neck'.

Ames · 16 August 2010 at 1:05AM

I've no idea of the ins and outs of mortgages, but I do know from reading SOAs on here that if it's around 40% of income or above then people start struggling.

Another thing to think about is if you can also put money aside for big repairs. There's no point spending all your money on a mortgage and then having a leaky roof and no boiler because there's nothing left to pay for it! Which is another scenario there's a lot of on this forum.

LilacPixie · 16 August 2010 at 1:32AM

Motivatedworkingmum - I have a mortgage of 50k and a joint income of 48k. I think alot depends on LTV for new home and interest rate availible. For us to go for a forever home we would need an mortgage of £150k ish and about 80% ltv. Payment would be about £984 5 year fix 6.24%. Our take home pay is a little over 3k a month so before insurances, council tax utilities etc we are using a third of our income.

ETA i also view mortgage as a debt and include it in both my snowballs and if anyone asks amount of debt i/we have

Primrose2004 · 16 August 2010 at 8:55AM

for us, mortgage is £100,000, house value approx £170,000. 15 1/2 years left to run on mortgage. £780ish per month on a repayment basis. Approx 39% of income, and tbh we struggle. But I only work part time as have 2 children (aged 6 and 3) Once I can earn more we should be ok

I'm 31 hubbie is very nearly 34. Mortgage due to finish the year hubbie turns 50.

The mortgages some of my friends have a re scary, we were lucky as we bought our first house in 2001 when prices were much lower. Our first house cost £78k, sold it in 2006 for £148k:eek:

FOURCANDLES_2 · 16 August 2010 at 9:01AM

All I can say cheap houses around every where but Rural Shropshire it seems some of the prices mentioned on here wouldn't even get 3 beds most posts wouldn't buy ex local authority.