What % Mortgage to Income

fivepound

What would you say is the highest % Mortage payment you should have compared to your income?

lightspeed

Each case is individual and should only be assessed in that way. This is why i believe affordability mortgages can benefit financially astute individuals earning an average wage.

A person paying 35% of their income on their mortgage could be seen as high risk, however, if this person lives a modest lifestyle and are in control financially they may be able to cope better than someone with a 25% income spend on a mortgage with a lavish lifestyle.

IMHO, the main things to consider when calculating what will suit you are:

- not only what you can realistically afford now, but if you could afford everything if IR's increased by 2 - 3%???
- could you cope if circumstances changed i.e loss of job, children etc...
- what disposable income are you least expecting to have for you to have a life and enjoy your home?

As someone with no debt (apart from a mortgage) and a sensible lifestyle, i personally think that no more than a third of your income should be spent on a mortgage or rent, a third on bills and savings and the rest to enjoy yourself with. Anything above 40% is likely to negatively affect most individuals.

Llyllyll

We personally have a mortgage of approx 23%. Could comfortably afford 27% and 30% would be at the limit of what we would like to pay.

As mentioned by lightspeed however, at this level we still have a reasonable amount of disposable income to enjoy ourselves with. Obviously certain things would have to go if income to mortgage ratio increased further.

Thanks,
L

A_Nice_Englishman

I agree with lightspeed, it depends very much on lifestyle.

One aspect which is often overlooked is travel to work costs. I live within walking distance of work at the moment so my travel costs are zero. In my last job, petrol, parking and bridge tolls cost me £17 a day or about £4000 a year. That would pay the interest on a mortgage of £67,000.

jamesd

fivepound, three times seems to generally be considered to be fairly prudent.

There is another issue, though. If you can afford a fixed amount for a mortgage budget, if you get a smaller loan and still pay the same amount, you can accumulate equity faster with the smaller loan. That higher equity is useful later on.

Going for a larger loan can be useful if you want to speculate ont he housing market continuing to rise before you need to sell. You pay the interest on the larger loan and bet that prices will rise by more than the extra interest you're paying. This doesn't loook like a good bet at present, with interest rates rising and house price increases tending to stabilise.

mkoprulu

I think it's all to do with monthly expenditure, therefore changes with every individual. In my instance, i'm already paying 37% of my income towards rent, and until recently, i was paying another 30% towards debt, leaving only 33% of my monthly income to pay for the rest. Now without debts, i am looking to get a mortgage, and commit up to 55% of my income towards it.

I_Claudius

fivepound wrote:

What would you say is the highest % Mortage payment you should have compared to your income?

bit too vague to answer without more info

as people have specified above there are a lot of variables that affect this type of equation

it may sound obvious but of course lot depends on income level, someone earning £30k will have a lot less left over after spending (for instance) 40% of their wage on their mortgage than someone earning £200k

and again someone earning £200k with massive debts may end up worse off than someone more prudent earning £30

It's a huge decision to make and one that requires a lot of research and above all being honest to yourself. Over ambitious levels of debt are easy to slip into, many people persuade themselves that they will change their lifestyles / outgoings in order to get a house that may in reality be beyond their means.

thehairybuilder

ours is currently 28%

I feel this is too high though so here`s hoping for a few pay increases over next few years!

pollyanna24

I've just worked out we pay 27% of our joint income to our mortgage. Not sure if that is good or not.

We overpay each month making the percentage we pay 30% of our income. Suppose it's a lot really.

dougk_2

I would be comfortable with up to 40% of my income, but I would only go for a fixed rate so I knew what my outgoings are. I think the key is what is affordable. If you were very lucky and for instance earn 60K a year then 50% wouldn't be a problem in my eyes as long as you are sure your job is secure (which many aren't).

canardo

we are currenly paying 23% of our joint income however intend to bring it up to about 30% with overpayments