Predicting Mortgage Expense in the future.

village_life

i am always baffled when i hear my parents talk about when they bought their house for £30k 15-20 years ago, and more recently, my in-laws have just finished paying off their mortgage which was £70 per month.... but once upon a time that was ALL of one of their incomes...

sounds bizarre.... which makes me wonder, is there any way of determining what our mortgage will be in 15-20 years time relative to our earnings?

for example, our mortgage is £170,000 with monthly payments of £994 - this is approximately 1/3 of our monthly take home salary (i.e. £3,000)

so in 15 years, what would be our mortgage relative to our salaries.... obviously this would have to be based on a number of assumptions, for example static inflation, interest rate and wage increase %'s

i am just curious, would anyone be able to work this out so.... more for curiousity than wanting to get anything significant from the exercise!

jaype

Depends on the rate of inflation. In the past it was 15% so obviously pay went up rapidly, reducing quickly the % of mortgage to earnings ratio. Now we are in low inflation so I would budget for that mortgage staying a big percentage of your income for quite some time to come, as a rough indicator

absolutebounder

M=(A X S)squared - (A X hp) + VC all divided by t
Where
M= Mortgage amount
A - income multiple
S = salary
HP = house price
t= time in years
VC = Variable constant which can be anything you want to make the figures look good