Mortgage payment as a fraction of salary

loanranger_4

I'm on the verge of buying a larger property and taking out a fairly large mortgage to boot.

I was wondering what proportion of a persons salary is sensible to pay the largest debt most of us are likely to undertake.

Also is there a average proportion that has applied historically and is still applies / does not apply today?

Thanks in advance

Finishrich

When we bought our house 12 years ago it was 3 x a single income or 2.5 x joint income. But interest rates were alot higher then than they are now, and thankfully houses were about half the price they are now!

I have a feeling though that lenders have increased these levels.

alanobrien

loanranger wrote:

I'm on the verge of buying a larger property and taking out a fairly large mortgage to boot.

I was wondering what proportion of a persons salary is sensible to pay the largest debt most of us are likely to undertake.

Also is there a average proportion that has applied historically and is still applies / does not apply today?

Thanks in advance

Interesting question. I take it you mean what percentage of a persons monthly salary is reasonable ?

When i had my first mortgage back when the rate was
some 15% the repayment was an uncomfortable 80% ish of my salary and i hope we don't see a return to those times.

Today after recently moving again its something like 50%
and that is more than enough for me thank you

I know that the number is higher for friends and i suspect given that the average mortgage was approx 115k last time i looked Nationally it may be higher still.

loanranger_4

Many Thanks for your responses.

Alanobrien this is exactly what I meant.

80% sounds painful ! As 20% to live on isn't much !

With interest rates quite low I assume that people are not stretching themselves that far.

I feel that a maximum of 50% is where my comfort zone is too, I estimate if interests rate (ever) went up to 15% then I would be paying 100% of salary JUST to cover my mortgage, but by that time the economy would have gone into meltdown.

walkerboh

Recently got a mortgage from HSBC and they worked on the mortgage repayments being a maximum of 60% of whats available to you after paying all contractual obligations (so of your disposable income)

HTH

bridiej

I've moved this into the mortgages forum as more relevant....

Bridiej

herbiesjp

Again difficult to say without knowing your full circumstances - but at the end of the day it boils down to what YOU are comfortable paying. As posted previously someone might be happy at 80% (or not really happy, but able to do it to achieve the goal of the mortgage) whilst someone else may only want a 40% exposure.

I know a lot of lenders that look at 50-60% exposure, like HSBC, but they do tweak these to help the client if need be.

swebber

I think it's important to look at your circumstances and not JUST what the bank think you can afford.

For example myself and Hubby, decided that we wanted to only get a Mortgage, that after a few years, if I wanted / needed to stop work (kids / health etc) we'd be able to pay it still.

So for us, a quarter of our wages was appropriate. Although we do pay, around 30% at present.

loanranger_4

Thanks for all your feedback. Agreed that this is dictated by personal circumstances (and sometime circumstances outside your control), it interesting to see the diverse range that people pay towards the mortgage.

Personally we're upgrading and will be going from 15% of net income to about 50% ! eeek! I won't be contributing to the debt free board for some time to come.