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

brit1234

I always thought that you were ok if your mortgage was 3.5 times salary. I don't know how that works out as a percentage.

The danger basing on percentage when interest rates are artificially low can be missleading. For example if interest rates rose to from historically low 5% which is still low it could put you over the 30% income past the 50% income.

The ploy by mortgage advisor's over the last decade to change from multiple of salary to percentage income was to get people to over borrow fuelling the housing bubble.

ukcarper

I have just been sorting out some old paper work and in 1990 I was spending 60% of my take home pay on mortgage payments and that was on a mortgage of 3x my salary at the time.

DizzyDasher

You sound very sorted to me - no big debts (presumably student loan costs would drop if your income fell too far?), savings/pension sorted, 2 decent jobs and prospects for advancement. Obviously losing one salary wouldn't be ideal - but it sounds as if that would make things tight rather than unmanageable (and you presumably might be able to do better than this with mixing some part time work or other child care options?)

Interesting to see ukcarper's experience - I bet that was pretty common at the time! People do manage on very tight budgets as a temporary situation - but given you're pretty comfortable in the immediate future you can presumably continue to save and put away a bit of a cushion for early childrens' years if your retirement savings are already under way?

I tend to be WAAYY too conservative about these things - a friend said to me "your safety net is also your education and willingness to work hard, and not only what you have in the bank" and I think that's a very good point (particularly when fairly young - I was probably about your age when she said it, and worried about whether I had enough safety net or not!) Horrible things can happen, but you can't expect to have enough in the bank to shield you from every eventuality - having said that it sounds as though you already have quite a good safety net if things get tight!

NeverAgain_2

Many years ago, I was advised as a single person to spend no more than a week's wages on mortgage repayment.

That's just over 25 per cent of take home income.

Nothing wrong with pushing that a little, up to a third, but any more could lead to budgeting problems.

I post on the debt boards, and most people with problems over there have mortgage or rent way in excess of a quarter of their income.

One size can never fit all, but the 25 per cent rule is a very good one.

manda1205

Im quite shocked that you say only 30%. My hubby brings home £1200 a month, currently our rent is £350 (which is 30%) but we are extremely lucky to get rent that cheap and have to do all the work to house ourselves. We are currently going to buy the house as landlord died, I suppose this is why we couldnt get a mortgage, but my FIL is going to buy for us. We were looking to rent privately again if we couldnt buy the house and minimum rent is £550 locally which would be 45% of hubby's earnings. We would still easily be able to afford this but I hadnt realised it was so high compared to what others spent. We easily save £300+ a month and there is always a £200 float in his bank ac too, we go out and go on holidays too, so what exactly do others spend all their 70%+ money on??!!

jamesd

At the moment my interest only mortgage is around 4.5% of after tax and after pension contribution and insurance income. Council tax is around 3.5%. I already have sufficient money in my repayment vehicle that I can expect it to repay the mortgage before the end of the term, so no allowance for that is required.

I could afford far more of my income without financial hardship. 60% wouldn't be stressful for me though at that level I'd need to use a higher interest rate for the calculation than the current one.

20% is eminently reasonably but you should check what it will be at higher interest rates to ensure that it will stay affordable. I check at 6% long term and 12% for at least a year. Both of those are easily affordable for me and 6% is a little over half of rent.

clairey179

In a very similar situation to the OP, our joint monthly income is £3400, new mortgage payments will be £660. We feel this is manageable (as the council tax will be higher on new house, so will gas/electric bills etc), and if/when children arrive, the mortgage would be 1/3 of my partners pay, assuming i'm not working at all.
As someone else suggested, I did a mini-budget based on my working 3 days a week after having a child, and doing that would mean things would still be affordable.

Again as other suggested, I looked at what the repayment would be if the mortgage rate was 10% to check it'd be do-able for a while, which it is.

neverdespairgirl

manda1205 wrote: »

Im quite shocked that you say only 30%. My hubby brings home £1200 a month, currently our rent is £350 (which is 30%) but we are extremely lucky to get rent that cheap and have to do all the work to house ourselves.....

We easily save £300+ a month and there is always a £200 float in his bank ac too, we go out and go on holidays too, so what exactly do others spend all their 70%+ money on??!!

70% of our income includes work clothes, getting to work (both often quite pricey), childcare (the biggest expense) and school fees.

busiscoming2

NeverAgain wrote: »

Many years ago, I was advised as a single person to spend no more than a week's wages on mortgage repayment.

That's just over 25 per cent of take home income.

Nothing wrong with pushing that a little, up to a third, but any more could lead to budgeting problems.

I post on the debt boards, and most people with problems over there have mortgage or rent way in excess of a quarter of their income.

One size can never fit all, but the 25 per cent rule is a very good one.

I was told this by my dad many years ago, when he and mum were first buying the rule of thumb was that the mortgage payment should be no more than a weeks pay. Always stuck to it too.