What is a "sensible" monthly mortgage % of income?

PipPip

We have two. Our home mortgage is 18% of my net salary and our ski apartment mortgage is 17%, so in total we pay 35% of my net income on mortgages. My wife is not working as she is raising our two young kids at the moment but will start some freelance work later this year, bringing that percentage down. At one stage (about 5 years ago) the two mortgages were 60% of our joint income but we've paid off capital, got low rate trackers and I've had promotions. At the time 60% was still OK as we had no kids but now we have two that would be a nightmare.

retepetsir

Yakubu22 wrote: »

Thanks all.

Our joint net (after tax) income is £3400pm and were considering a purchase price which would equate to £715 pm mortgage. So roughly around 20% of our joint income. But with bills/tax/insurances our total house related outgoings would be just under £1100.
This doesnt include stuff like petrol/food/socialising.

Does this seem reasonable to others? If we have kids in the near future then things would be a lot more tighter.

That seems more than reasonable. Our joint income is ~£3000 and we purchased a 2-bedroom flat back in February in the SE of England. Our mortgage payments are £800 per month and its manageable. Our spend once bills, food, etc are added is usually around £1400.

Yakubu22

DizzyDasher wrote: »

This sounds very manageable: that is well below the levels that people usually suggest as "doable", which means you should also be able to survive some of the curve balls that life will throw at you - but things I would think about to make sure you are comfortable are:

- Existing Debt: do you also need to set aside income for credit card repayments, loans etc? If so I would be tempted to treat this like a tax (i.e. take repayments off your post-tax income) and see if things still look OK.
- Pension and/or retirement savings: do you have these in hand (e.g. occupational pension, ISAs?) - if not then you need to allow in your budget for some kind of savings for old age. How much depends on your age and how long you are happy to work for (maybe happy to is the wrong phrase!!) - if you are still pre-kids sounds like you have time, but it would ideally be good to get some savings under your belt before kids arrive.
- Childcare: If you do plan to have kids the main cost I believe (I'm sure parents on the board will correct me if I'm wrong!) is childcare/loss of earnings when they are little. How would you deal with this? Might be worth doing a mini-budget for how you would cope if you had a baby now (e.g. living on one income, or paying for child care, or whatever you would do), and see if it still works. There was an article in the Graun last week where somebody reckoned they spent about £1k on baby stuff for their first baby (and then you need to add in income/childcare impact) - but they had quite a few hand me downs and loans so it depends on whether you already have friends with older kids who can lend you lots of stuff - if not it could be a bit more!
- Changes in mortgage rates: What kind of mortgage are you looking at? If it is variable rate, then personally I wouldn't expect rates to increase much in the near term (next couple of years) - but that's just an opinion so you need to budget to make sure you can at least handle a return to more "historically normal" levels.
- Changes in income: Can you expect any income increases or promotions? Again, if you are quite young (sounds like you are!) then maybe you can - and this could help reduce worries about future interest rate rises, for example. Other things that might make you more confident of surviving e.g. redundancy is if the place has a spare room that you could rent out if things got tight (though I appreciate this doesn't really combine well with the baby thing if you are doing that!) But this can be tax free income, and depending on where the house is you might be able to find a lodger who only wanted to be there during the week, giving you the house to yourself during weekends! Of course you could also temporarily stop saving if you had something like a redundancy.
- Insurance: you say you have included insurance in your figures: I guess that is at least buildings, contents and car if you have a car. Might be worth thinking about life insurance too if you are taking out a joint mortgage. There is probably a board for that somewhere!

Anyway, that is what I would be thinking about. In the end life can sometimes smack you around the face in ways that you couldn't or didn't plan for, and if you waited to be rock-solid bombproof for all possible events you'd be waiting for ever - but I still think it's worth thinking about these scenarios, looking at the ones that would put you into trouble (there will always be some), and thinking about how likely they are. Only you can decide how much "risk" you want to take. The fact you are even here asking the question suggests you probably like to avoid risk I guess, or at least be prepared for the worst case scenario!

Good luck whatever you decide! Sounds to me like you should be fine, but it's worth running through all the main possibilities for the next few years and figuring out how you would cope.

That's an excellent response thanks. In brief;

- Existing Debt: Only Student loans -which for me (the main earner) is nearly paid off.
- Pension and/or retirement savings: I have a small company pension scheme plus I put away savings each month.
- Childcare: This is my main worry! With just one income (mine) covering two people's living costs will be tough - let alone an extra mouth to feed. Whereas our joint income net is £3400 - mine alone is just £2000. So £1100 for household bills, with all the other living costs (food, petrol, phones, Gym etc) on top of that. Would really stretch us on one salary.
- Changes in mortgage rates: Another valid factor. I was looking at a low tracker rate. Which leaves me open to % rises but as you say on the short term - it's unlikely to to increase quickly. So I'd risk staying ona tracker for a couple of years.
- Changes in income: I'm fairly young, 30, and would hope to boost my income in the near to longer term. Nothing is guaranteed but im confident of maintaining this level of income at least.
- Insurance: My figure of £1100 includes Mortgage/Critical Illness cover and House+Contents insurance. However Car Insurance is not included roughly £32pm.

First_Time_Buyer_Guru

Generally a third of your income is considered safe and proper to be spending on a mortgage every month. It's slightly frustrating that mortgage lenders decide this proportion for us as i'm sure there are many people out there who would happily apply a higher percentage of their outgoings to the roof over their head!

holly_hobby

From a mortgage lenders general affordability matrix, circa 35% of your income - which must be the total cost of mortgage payment & product (i.e endowment in the case of interest only, or a DTA for capital & interest). Of course other commitments to your income may reduce this, or let them go a little higher - but this is a starting point from which they demonstrate responsible lending practices.

Hope this helps

Holly

FATBALLZ

Yakubu22 wrote: »

Thanks all.

Our joint net (after tax) income is £3400pm and were considering a purchase price which would equate to £715 pm mortgage. So roughly around 20% of our joint income. But with bills/tax/insurances our total house related outgoings would be just under £1100.
This doesnt include stuff like petrol/food/socialising.

Does this seem reasonable to others? If we have kids in the near future then things would be a lot more tighter.

My financial situation is very similar to yours with almost identical income and mortgage. So I think it's sensible!

I feel comfortable knowing that we could (just about) live off one wage if one of us lost our job, or could both live off NMW if we both lost our jobs and ended up working in tesco.

Childcare is expensive, we are paying for one child in nursery, but couldn't afford a second one.

billybluehat_2

When I left school at 18 and got a job I was still living at home. My dad took 30% of my wage he said I would thank him one day. I wasn't happy at the time but he was right - thanks dad

lvm

I should only pay 13.8% of my salary on my mortgage but with the small overpayment I pay 16%. I also have a lodger so if I added that to my income I should be paying 11% but pay 12.8%. My outgoings are broken down as follows (with lodger income):

Mortgage - 12.8%
Tax, Gas/Elec, Phone, Internet, Insurance - 11%
Food, Entertainment & Travel (I use CCs up to about £200 a month) - 11.6%
Debt Repayments (long defaulted and not accruing interest) - 3%
Savings - 58% (due to have different debts I give all savings to my Dad to invest in his businesses and he will give me a 10%

That leaves 3.6% to sit in my current account. It tends to be more than that as I paid a huge chunk of council tax at start of the year. I also get more income from some betting at about £300 a month.

(Have I nothing better to do on a Saturday morning than to work that out?!?!)

amazamum

At the moment we should be paying approx 18% of our monthly wages towards our mortgage,(thats not including bills),but I manage our money quite well so we pay approx 45% instead.
We are trying to get it paid off as soon as possible.

thelizzyfiles

Don't know if I'm doing something wrong then coz mines at 45.63% of my wage , making over payments of £75 a mth till the end of the yr then will re look at out goings. All the bills are paid on time and I've paid off over 3k of credit card bills in the last couple of yrs but apart from that things are ok for me at the mo :0)