260k mortgage on 65k salary doable or silly?

Louisdawg

Hi All

As above really - do you think it's acceptable/usual/bit tight or crazy. I live in London

Deposit would be 160k (Minus 20k moving costs etc) so say 140k

Purchase price 400k

Net pay per month 3700

mortgage 1400

bills and food 750

pension 360

travel 160

Leftover 1030 for Myself+wife+bubba

Wife not currently working but will be going back part - time next year?

Thoughts? We currently own our own house(mortgaged) but feel we want to make the next stepup whilst still young enough for a 25 year mortgage (34 years old)

Thank you

sirmosh

People manage on a lot less, but it depends how you want to live your life really. If you're wife will be working soon then that should ease things enough to make it quite comfortable. Personally I would rather live more comfortably in a smaller house than stretch myself although compared to most people it doesn't sound like you'll be living on the absolute limit at all.

GAH

£1000 left at the end of the month is a pretty nice position to be in, most people are living on the breadline at the moment.

From info you have given it seems doable,

What about saving, holidays, car tax, Insurance, TV LIcence, etc.

You could do your own statement of affairs and work your costs out down to the penny. Link below

http://www.makesenseofcards.com/soacalc.html

If you want further advice, you might be best posting it on the Debt Free Wannabe board, beware if you do post there though, you may need a hardhat.

de1amo

if the bank accepts your application then they consider you able to 'do it'

Louisdawg

Thanks Sirmosh

We don't spend much and try to save almost everything - not sure what for just the way I was brought up.

The figures do sound a lot but in South East that won't go massively - but in my mind it feels comfortable.

Just want my next move to be the last one I'll have to make for a while. Current house is lovely but is a townhouse so not really family friendly.

We want to move we know that much - the dilemma is now or in 4 years time - problem is the 400k house may well be 450k by then and any extra saving we did would have been for nothing if we still need same mortgage to buy same house?

Thanks

kingstreet

Any other credit commitments? If so, how much each month?

Is that all your salary or made up of two parts? What's the split, if there is one?

BigAunty

Download the MSE budget planner for a comprehensive way of detailing your expenses which are far too vague and partial in your summary so as to be of any help to you in determining affordability.

In the event of redundancy, what is your savings buffer? Because your benefit entitlement would be £65 JSA a week plus child benefit. Any mortgage interest support wouldn't kick in for 3 months, would be on the interest only part of it and I'm not sure if there is a maximum mortgage amount it would cover, if there's a cap.

And have you modelled the impact of increased mortgage interest? It's at a historical low at the moment so the only way is up. Sometimes only a modest increase is enough to make a family struggle - what if the mortgage payment doubled...?

Louisdawg

GAH

All the bills you say would be included in the 750 except the holiday bit which we will do using the leftover.

I guess I just want to know in my head that it's a long term sustainable situation.

de1amo - Banks would lend more than this but I'd never take max what bank would lend - to me just because they'd lend it, it doesn't mean it's always sensible.

Louisdawg

Kingsteet - no other credit commitments. All my salary as missus is currently looking after bubba. Although will go back to work part time 2013.

Big Aunty - I know what you mean about mortgage interest but I've been working on 5% figures (1st 5 years would be fixed at about 3.89)

If mortgage payment doubles then interest rates will be 12%++ and as a long term plan I don't think they'll get there. My personal view is max 6%-8%.

kingstreet

A 25 year £260k mortgage @ 5% pa (a historically more reliable rate) is £1,520 per month. This could be reduced by choosing a good five year fix at say, 3.5% then the monthly cost would be £1,301.

I've just run the Nationwide affordability calculator and got a figure of £277k for a single income of £65k on a joint application with a dependent child. Assumed no other credit and 65% LTV.

It's do-able. I'd recommend caution though.

de1amo

i always use the maxim of 3,5 main wage and once on the second salary because its a tried and tested ratio!