What Mortgage to Salary Ratio to still live comfortably?

welshman10

We are looking at a bigger house. We currently have an outstanding mortgage of 0.8x our combined salary.

Looking to upgrade and after taking into account the equity in our current house, plus savings, the amount we'd need would be just under 2x our combined salary.

At the moment, with our mortgage payments being quite low, we can live comfortably, never having to check when it's payday, going on exotic holidays, having no other debts etc etc

I've seen some stories of people borrowing 4x and 5x their salaries and, while I'm too tight/conservative to contemplate something like that, what do normal, sensible people borrow? 2x/3x combined salary?

We still want to live fairly comfortably, though we accept that we won't have the same disposable income and will have higher council tax etc

GMS

Only you can decide what is 'comfortable'

At the minute your mortgage appears to be very low in relation to your salary.

Work out what amount you think is comfortable and stick to that.

People with 5x income mortgages may decide that comfortable means no holiday, plain food and an old car. If you think comfortable means 3 foreign holidays, lobster for dinner and a new Merc then you would not stretch to 5 x income.

beecher2

It depends on the income too. If you have a household income of £100k, a mortgage of 400k is still going to leave you a lot of spending money. If you're on 20k, then an 80k mortgage isn't going to leave you with much.

WellKnownSid

We have a friend who has a 5x mortgage... I cringe when I hear about the upset it's causing. And... to be fair... it's not the 5x mortgage, it's the OTHER mortgage they have (a buy to let) and the huge amount of other debt they've amassed that's the real issue.

Perhaps high salary ratios come hand in hand with encouraging more debt... with less disposable income people may be pushed to take on more debt when unexpected expenses arise.

seafarers_wife

we are going for 1 x joint net salary ratio or 1.5 sole net salary ratio on our mortgage. we are buying a wreck of a place as a fixer upper which is why the ratio is so low.

DVardysShadow

welshman10 wrote: »

I've seen some stories of people borrowing 4x and 5x their salaries and, while I'm too tight/conservative to contemplate something like that, what do normal, sensible people borrow? 2x/3x combined salary?

Live for a year putting all your surplus money aside as savings to the extent that you are comfortable with. Then you will know how much you can comfortably afford. Allow for interest rates going up and take into account how much fat you left on the budget for the year. This will indicate where you can pitch your borrowings

originalmiscellany

As others have said, it's your out look to debt that's key. We have a low debt/mortgage but aren't risk takers; and never have been, whereas a higher % may be perfectly manageable.
You have to think can you cope if your interest rates rocket up to say 5%, and then it won't just be your combined salary but the % of your monthly salary that is spent on your mortgage.

hillcats

The lower the better, we have never owed more than 2x our joint income that is comfortable for us.

WellKnownSid

originalmiscellany wrote: »

You have to think can you cope if your interest rates rocket up to say 5%, and then it won't just be your combined salary but the % of your monthly salary that is spent on your mortgage.

We took on 120% of our salary. With the overpayments we're making - we calculated that we could handle 25% interest rates at the end of our fixed rate. :eek:

JSR

At the time of advance my first mortgage was 2.1x my salary and my current one is 2.8x my salary. I think income multiples are pretty much irrelevant. My current mortgage leaves me with far more disposable income than my first one did.

Do a budget and see what you can afford. Don't forget to make allowances for the possibility of high interest rates - say 10%.

hcb42

We are comfortably under 2x with an income of £90k.

however it also depends on age and length of time left to pay off mortgage. I would certainly not go any higher than that. hubby is nearly 50 so next plan for us is to knock a few years off the end by overpaying, otherwise we will be finishing paying mortgage at 64/57 yrs old.