Can I afford a mortgage?

Denene

I'm currently in the (very, very) preliminary stages of buying my first home, and have been doing the sums to see what I can afford. I was hoping for someone to look over the sums to see if they add up. I used a calculator to produce this:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 0

Monthly Income Details
Monthly income after tax................ 1267
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1267

Monthly Expense Details
Mortgage................................ 380
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 50
Electricity............................. 40
Gas..................................... 58
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 10
Mobile phone............................ 15
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 10
Groceries etc. ......................... 200
Clothing................................ 10
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 70
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 25
Pet insurance/vet bills................. 0
Buildings insurance..................... 12
Contents insurance...................... 6
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 5
Haircuts................................ 10
Entertainment........................... 14
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 927


Assets
Cash.................................... 0
House value (Gross)..................... 100000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 100000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 70000....(380)......4.19
Total secured & HP debts...... 70000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Total unsecured debts..........0.........0.........-


Monthly Budget Summary
Total monthly income.................... 1,267
Expenses (including HP & secured debts). 927
Available for debt repayments........... 340
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 340

Personal Balance Sheet Summary
Total assets (things you own)........... 100,000
Total HP & Secured debt................. -70,000
Total Unsecured debt.................... -0
Net Assets.............................. 30,000

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using other browser.

I'm looking at 3-bedroom terrace or detached houses. The amounts are estimates: do they look right?

Most people I see buying seem to be couples. I will be buying on my own - is this feasible without the "safety net" of a second salary? I'm also worried that, if interest rates rise by any significant amount, I will be unable to afford my mortgage. I know that it's impossible to predict 5 years down the line, but is there anything I can do to minimise the risk of this (apart from winning the lottery!)

Many thanks in advance for any advice.

D

R_P_W

How much mortgage do you think you would need for a 100k property? Have you been able to save up 10%+ deposit plus fees?

I think for 100k you will struggle to get a detached house.

Being honest, i think your SOA isnt capturing all your expenses. Council tax you can double or even triple that.

Best thing to do is over estimate your costs and under estimate your income....you already say you couldn't afford the mortageg with a rate increase so I would think very carefully about it all

Tixy

Do you currently live in rented alone? are some of the estimates from those costs?
Have you identified houses in your area for around £100k that you are interested in?

Council tax looks a bit low to me (if you were in England), even taking into account the 25% discount and assuming it will be a low council tax band. Have you based this on actual figures from the council where you are looking to buy? if not you should be able to do this fairly easy.
I also though that as water rates were part of council tax that ctax tended to be comparatively higher in NI?

How would you manage the mortgage payments if ill or made redundant etc - I would factor in the cost of some insurance for this.

In terms of interest rates rising - Is the 4.19% a fixed rate deal you have looked at? do you anticipate your earnings increasing much by the time the fixed rate deal ends? Would you be prepared to rent out a room to a lodger if your rate did increase and you were struggling?

£340 surplus seems quite tight considering some of your outgoings look really low (such as the £14 for entertainment and the phone costs etc) and taking into account that you would ideally need to building up an emergency fund for replacement furniture/white goods etc as well as house repairs etc.
The £340 should hopefully cover those costs - but would probably leave you with very little for any potential increase in your mortgage.

(I've assumed you've already saved sufficent for the deposit / moving costs and furniture).

Denene

Hi,

Thank you for the replies.

I should have mentioned I'm in Northern Ireland, so I will pay rates instead of Council Tax. The houses I've been looking at are in the £600 rates band.

I will have a deposit of £30,000. I have additional savings to use for fees etc. and for an emergency fund. Houses range from £70-100k. I was estimating a mortgage at 3.5 times my salary, ie. approx £65k, but I'm not sure if this is accurate?

R P W, sorry. My first post should have read "semi-detached" - there are a few of these in my price range.

Tixy - thanks. I hadn't thought about mortgage insurance. I will add that to my list.

The 4.19% is a fixed rate deal from my own bank, which I used as an example. I hope to use a broker when it comes to it, especially since I'm a clueless FTB!

One of the reasons I am looking at 3-beds, is so that having a lodger is a possibility.

I agree that I have probably underestimated my outgoings. My expenses at the moment are quite low, and it's difficult to work out the bills for an imaginary home

HappyMJ

£14 a month for entertainment. Are you sure this figure is correct? What do you do to entertain yourself? Nothing for a holiday? I would always put at least £20 a month per person aside even just to go away for a weekend once a year.

You have £340 to play with so you can increase the figure without going into debt. The more you plan for an expense the less likely you will need to use credit in the futue.

Denene

HappyMJ wrote: »

£14 a month for entertainment. Are you sure this figure is correct? What do you do to entertain yourself? Nothing for a holiday? I would always put at least £20 a month per person aside even just to go away for a weekend once a year.

You have £340 to play with so you can increase the figure without going into debt. The more you plan for an expense the less likely you will need to use credit in the futue.

Thanks HappyMJ. That's a good point. The £14 is for a couple of subscriptions (magazine + computer game). I'm a bit of a stay-at-home type , so I don't spend that much on entertaining myself, but could definitely stand to add a bit for an occasional day out.

I really, really worry about getting into debt, so would be quite happy to cut down on non-essentials if/when needed. It's the unavoidable expenses that concern me.

HappyMJ

Denene wrote: »

Thanks HappyMJ. That's a good point. The £14 is for a couple of subscriptions (magazine + computer game). I'm a bit of a stay-at-home type , so I don't spend that much on entertaining myself, but could definitely stand to add a bit for an occasional day out.

I really, really worry about getting into debt, so would be quite happy to cut down on non-essentials if/when needed. It's the unavoidable expenses that concern me.

What unavoidable expenses? Does the house you are going to buy have a boiler? They have a lifespan of about 15 years. You can either buy insurance including an annual check to spread the cost into a monthly amount or you can put an equivalent amount into your "Boiler/Central Heating pot". This amount should at least be enough to cover an annual service and possible future replacement and enough to cover an emergency call out in the winter. If you don't use it after a few years then you can then stop adding to that pot.

JimmyTheWig

Denene wrote: »

I'm also worried that, if interest rates rise by any significant amount, I will be unable to afford my mortgage. I know that it's impossible to predict 5 years down the line, but is there anything I can do to minimise the risk of this

You can get 10-year fixed rate mortgages but these tend to be few and far between and so expensive.
Other than that there's nothing you can do to stop rates rising if that's what they do. But there are things you can do to guard against it.
* Get a decent length fixed rate deal, e.g. 5 years. This will mean that you will be safe from any increases for the first 5 years.
* Overpay your mortgage. By reducing the balance the impact of a rate rise will be less severe.
* Hope for / ensure you get pay increases each year. The amount you owe won't go up, regardless of whether the interest rate goes up or down. So after 5 years of pay increases you should be better placed to afford a rate increase.

Denene

Unavoidable expenses - the boiler is a good example. I like the idea of having pots assigned to specific possible problems. I will definitely look at getting insurance for this.

JimmyTheWig - thanks for the advice re mortgages. I'd like to be in a position to start over-paying in a few years, even if that's not possible now.

Jellybean_Jo

Hi Denene,

I've just taken the plunge and purchased my first property. I've been in just over three months now, and will definitely say, no matter how prepared you think you are and how many lists you make, the first couple of months will be tough. I planned, planned and planned again every single penny of my outgoings and every possible thing I might need to buy/fix/replace in the property and there was always more. So just be prepared for that.

Obviously, we're all different, and spend/budget differently but from my own experience I would say that some of your figures look a little off to me. Firstly, you've got figures for gas and electric but not water. Surely that can't be right?
Will you be living on your own? I live on my own and budgeted 200 a month for groceries...I've found that personally for me, that was too high and I would have to be really extravagant to spend more than 30 a week; by extravagant I mean an abundance of alcohol, 'treats' and expensive brands.
The general areas of entertainment/clothing/presents/holidays etc look really low. Really look at that one, as with the best will in the world with regards to saving money, we all need treats at least now and then. Personally, I'm kicking myself for not holding some money back to go in the holiday fund because I've never felt so much like I've needed one :-)

drummer_666

I think you can afford it yup. I think some of your calculations are a little out, but you have good sized deposit, you have some money set aside for emergency fund and as you say, if you needed to you could always take in a lodger for 6 months / a year / whatever time period to get a bit of cash

My take home wage is prob about £50/month more than yours, I spend around £300 on social and fun stuff. Plus I have two cats who need feeding.

My mortgage is £300 a month. House mate pays £330 a month. I set aside £300 for social stuff, £170 house DIY, £150 or hols/presents/car fund, £150 to pay off my car.