What % of Your (Combined) Take-Home Salary Goes on Your Mortgage?

ItMightBeUsefulOneDay

tleefox wrote: »

the monthly mortgage payment will be the equivalent of 39% of our combined monthly take home salary.

I would say that's too high. I would set a maximum of 33% of individual take home.

However, everyone is different and has different priorities. So to assess things properly you need to do a budget, a realistic (and preferably life tested - food is often higher than you realise) household budget to seewhere you would be financially with this level of mortgage. Remember to budget for things like Christmas, birthdays, holidays, vehicle repairs/replacement and a whole host of housey stuff like new washing machines, roof repairs, new carpets and so on.

Do you still have money to live? Bear in mind that with real inflation running at >10% things are going to be rising in price. Many essential utilities and councils will be looking at all avenues for revenue generation so expect inflation shattering rises all round from them. The recent 19%+ for gas / electric is just the start.

You still need to enjoy life and be able to put some aside for a rainy day fund. Life is full of the unexpected and you need to have enough "slack" in your finances to absorb some of the bumps along the way.

What happens if one of you lost your job or stopped work to have children: Could you manage?
What happens if interest rates rise: Could you manage?

hazyjo

Our mortgage is around 40% of take-home pay, I think, but we don't have kids, have a 16 year mortgage, and 40-odd % equity. As said, everyone's different.

We live very comfortably, but then our take-home pay is higher, we have no debt, but a very large mortgage.

Have a think about how much your salaries have increased over the years and what future earning power you both have. Just over 10 years ago, I was earning nearly half of what I'm earning now. Things do generally become more affordable over time, but remember interest rates might rise! And please think about the kids situation. Don't cripple yourselves with massive outgoings if you're likely to have them in the next couple of years, especially if you want time off or want the option of going part time. You could always try and overpay and get a slightly flexible mortgage that might allow you a break if you've overpaid at any stage (usually up to what you've overpaid).

Jx

puddy

can i ask how much you're spending on the wedding and all associated costs?

puddy

hazyjo wrote: »

Our mortgage is around 40% of take-home pay, I think, but we don't have kids, have a 16 year mortgage, and 40-odd % equity. As said, everyone's different.

We live very comfortably, but then our take-home pay is higher, we have no debt, but a very large mortgage.

Have a think about how much your salaries have increased over the years and what future earning power you both have. Just over 10 years ago, I was earning nearly half of what I'm earning now. Things do generally become more affordable over time, but remember interest rates might rise! And please think about the kids situation. Don't cripple yourselves with massive outgoings if you're likely to have them in the next couple of years, especially if you want time off or want the option of going part time. You could always try and overpay and get a slightly flexible mortgage that might allow you a break if you've overpaid at any stage (usually up to what you've overpaid).

Jx

i think this is a good point, ours is also a 16 year mortgage with 12 years left, we also have high equity, about 60%, BUT i would say that during my 20s and 30s i was regularly working 2 or 3 jobs at a time, working weekends, evenings etc. im too tired for that now, so my income is much lower than it used to be. i still have the option of going back full time for an employer (im self employed at the moment) and deliberate all the time about this as it would increase my income by about 100%, BUT i dont want to do this

so i would say as you get older your ability for overtime, extra work and enthusiasm can get less meaning that your income potential reduces

tleefox

puddy wrote: »

can i ask how much you're spending on the wedding and all associated costs?

Course you can, and I'm pretty sure by asking I know what you will say next!

We originally wanted to spend £12k, but are now looking at more like £13k.

I know as a one off for something this is a lot of money, but compared to what the majority of the population spend on a wedding, this is quite low. We will not be getting into debt for this either - this will be money we have saved or contributions from parents.

JodyBPM

Honestly, given the circumstances that you've outlined, and making a few assumptions and looking at the current low interest rates, I think that is WAY too high.

If you are currently 26, without children, and want to live in the house for 10-15 years, then this will be the house you most likely will have children in (assuming that you will have them, and given that the majority of people do want them, even if they are not on your agenda now, there's a good liklihood that they will be in the future). Would it be possible for you to maintain the mortagage through maternity leave, on a single salary or with one partner working part time, or when paying out upto £1000 per month per child for childcare? Also, interest rates are at an all time low. Whilst I have no crystal ball, so no idea what will happen to rates in the future, from a starting point of 0.5% base rate, there's only one way that rates can really go, and I'd say it was a pretty safe bet that at some point in the next 10-15 years that they will be significantly higher than they are now. Whilst you are "safe" for the 5 year fixed period, you still need to have some thoughts about how you will manage after that if the rates are far higher.

I don't think that simple comparisons with what other people pay is a particularly good measure, but for the record, our mortgage is way less than 10% of our take home pay of one full time and one part time worker. We do however, significantly overpay our mortgage, and pay around 30% of our combined f/t & p/t salary into mortgage/mortage overpayments/a savings account for lump sum overpayments. I think we would struggle to put anymore than 30% of income towards the mortgage, and of course our way gives us a huge buffer to reduce the overpayments should interest rates rise sharply or income fall for any reason.

getmore4less

tleefox wrote: »

Thanks for the comments thus far.

The difficulty we have is that we are both from Bristol, but are currently in the process of moving away from Cardiff where we bought and sold our first home together, and Bristol is much more expensive than Cardiff. We both want to be in Bristol and to be able to afford it, this is the amount we will need to spend.

We are getting married next April, but have pretty much got all of our budget together for that as we have both been saving a lot over the past year since we got engaged.

Finally, we have saved a 10% deposit, and have money tucked away for the stamp duty and any work we would want to do to the house immediately i.e. painting and decorating.

You might just be trying to do too much forget % do a budget lookng forward based on a house you would consider buying.

You can only spend the £ once so you have to choose,
eg: delay decorating=bigger deposit==income used to decorate later

Debt is just commiting future income with added costs(interest).

puddy

tleefox wrote: »

Course you can, and I'm pretty sure by asking I know what you will say next!

We originally wanted to spend £12k, but are now looking at more like £13k.

I know as a one off for something this is a lot of money, but compared to what the majority of the population spend on a wedding, this is quite low. We will not be getting into debt for this either - this will be money we have saved or contributions from parents.

ok, so you know that you would be better off putting that to your deposit and going for a cheaper dress, long weekend honeymoon and a good slap up party down at the church hall, with a straight forward nibbles buffet

but, that is your choice and its obviously what you decided to do. you're brave for posting that!

personally i couldnt consider spending that on one event when im looking at quite a high % mortgage payment at a time of economic uncertainty for everyone, especially when i know that i could have a whale of a time with a very simple happy day on a budget

ps. dont compare your spending to others, you say its cheaper than lots of people, 'lots of people' are not the ones who have to live with the economic choices you make, you do

tyler80

Our mortgage payment is 18% of combined income and we put down 20% deposit.

With only 10% deposit are you sure you'd even get a mortgage where the payment was that much of your income?

Raspberry_beret

Our mortgage is 32% of my take home pay alone. DH runs his own business and doesn't currently take much out so we don't tend to budget for his earnings. I guess it would be in the mid 20%'s if you included DHs pay.

I agree with others you need to think about your other outgoings (both now and in the future) and think about your plans for the future. In particular, having children would mean a much reduced income for one of you for up to a year plus either one of you stops work or big nursery bills (unless you have family willing to help).

If you are currently debt free and bills are fairly normal (and no planned change in circs for a while!) you could overpay your mortgage by, say, at least £500 a month, a total of £30K over 5 years (plus whatever amount would be repaid in your normal mortgage payments) giving you much more equity and a smaller mortgage putting you in a really good position in 5 years time. I'd do lots of sums (probably including a spreadsheet :rotfl:) and work out some options.