Taking the biggest mortgage i can out

EvilJaz

Hi All,

In need of some expert advice again.

I am currently in the process of looking for a house and have been quoted that from a broker the max i could borrow is [FONT=&quot]£222,000, so would mean i could get a house valued at around £247,000.

I have been trying to find out how realistic it would be for me to be able to afford this.

Background information
It would be a joint application and together we earn just under £50,000.

Ive estimated the following a month:
Council Tax: £127
Water: £30
Gas/Electricity: £100
TV and Internet: £70
House and Life Insurance: £80
Food/Drink: £300
Mortgage (@ 4.44%): £1,050

Petrol: £300
Car Insurance: £100
Mobile: £100

Total Goings Out: £2,257
Monthly Salary: £2,800ish after pensions

Plus a couple hundred quid a month 'going out' money.

Leaving a surplus of £350.

My question is are my figures accurate? and seeing the above would you consider myself as being able to afford it comfortably?
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shortchanged_2

Personally I think that is a ridiculous mortgage on that level of income.

And £100 a month on a mobile, is that for real?

Have you got any further savings/debts?

Any possibility of children in the future? They are expensive and usually your income will be reduced.

Could you comfortably afford future interest rate rises?

chequer71

Interested to see some responses to this myself. My partner and I have just been umming and ahhing over the same dilemma, with very similar figures to yours involved. Guessing you're also FTBs and looking at 90% LTV?

But we were wondering whether we could stretch our maximum to £190k, having previously considered £180k pretty much the limit. The extra £10k seemed to generate so many more attractive properties on Right Move (a slippery slope I know!).

I'd have thought that the stretch to £247k that you suggest looks pretty risky. What fix are you looking at to get 4.4%? I know there are a fair number of 5-year fixes around at that rate but with us being in historically low times, a change of even 1-2% at the end of that period could make a serious impact, no? Not to mention that council taxes aren't going to be frozen for ever and petrol/food prices are increasing all the time.

Are you expecting any lump sums or pay rises over the next 5 years that will mitigate those worries?

EvilJaz

Yup both first time buyers, looking at 90% LTV maybe 85%.

£100 a month on a mobile phone is for two people, technically its £80 but i like to round up.

Children maybe in the future but at the moment no. Financial security and a nice home is first (only 23).

Only debt is a student loan everything else can be stopped/reduced (including pension payments).

I forgot to mention the 4.44% is fixed over 5 years.

I expect my salary to go up fair nicely. In May i will be sitting my last CIMA exam and i will then be qualified. Also i have a guaranteed payrise coming up of a few %.

Hoping within the next 2 years my salary will be £40k+.

guesswho2000

EvilJaz wrote: »

Yup both first time buyers, looking at 90% LTV maybe 85%.

£100 a month on a mobile phone is for two people, technically its £80 but i like to round up.

Children maybe in the future but at the moment no. Financial security and a nice home is first (only 23).

Only debt is a student loan everything else can be stopped/reduced (including pension payments).

I forgot to mention the 4.44% is fixed over 5 years.

I expect my salary to go up fair nicely. In May i will be sitting my last CIMA exam and i will then be qualified. Also i have a guaranteed payrise coming up of a few %.

Hoping within the next 2 years my salary will be £40k+.

My thoughts...taking a mortgage that large on that combined salary is a bad, bad idea*; no pay rise is guaranteed, ever, until you've got it in writing from your employer (and even then, redundancy is never impossible); don't ever stop paying into your pension.

*EDIT: unless maybe you live in London? As you won't get anything decent for any less...

EvilJaz

It's written in my contract that over the next 3 years i will get a pay rise of between 2 - 4% every year.

I am starting to think that it is stretching us maybe too far.

Playing on the idea of maybe going for an 'ok' flat costing around £160k in a 3 year fixed to get some more equity.

whatyadoinsucka

where are you looking to buy, as that amount in some parts of the country seems high for a first house.. I know wages in many parts of the country are significantly lower than what was offered to newly qualifieds ACMAs in 2005 back then it was £35k now I see newly qualifieds looking at £32k..

House prices are not rising so your equity will remain high unless you can lump some payments, interest rates will be high as you have high LTV
If your work or relationship goes wrong you will be stuck ..
No plans to travel, move cities etc

Have you lived together before, can you rent to see how life evolves, it's a real big noose at your age.. IMHO
House prices are going nowhere at present build up some equity
Are your cars in good health what about garage expenses etc

Ps a payrise of 2-4% will keep you up with inflation if at all

EvilJaz

Houses around where we live are soooo very expensive.

We are looking around the KT6, KT7, KT8 and KT9 areas.

On a 165k flat my calculations are as follows:

25k Deposit meaning a 140k mortgage. Using my 85% LTV rate of 3.74% mortgage monthly payments would be £598 a month. I believe most months i could pay off an additional £400 a month.

Cars are all fine. I am required to do a lot of business miles so usually claim around £200 a month extra.

What would you say would be the max mortgage i should consider to be 'comfortable'?

snozberry

Don't spread yourself thin. You have no idea what the future has in store for you so borrowing the most that you can is nothing more than a recipe for disaster. Spend the next year or so saving as much money as you can and then borrow the least amount needed.

I mean - what if one of you fell ill? lost your job? needed to do some building work/repairs? got knocked down by the number 9 bus? split up? needed to replace your car? wanted to go on holiday?

Think about everything carefully before committing yourself to a financial ball and chain.

EvilJaz

Trying to think of everything, it's why i have come to here to get the very best advice.

In the last year alone around the area i have been looking prices have jumped up quite a bit during a period where house prices were expected to fall.

Falling ill/getting hit by a bus should be covered by the insurance. Losing a job would definitely be a worry but probably is so for many other people.

lee111s

No need to stretch yourself so early on, all manner of things can happen that would put realt strain on your finances. You really need to think if it's worth it or not ploughing so much of your income into your house. You'd be better off getting a lesser mortgage and saving the money you would spend on a larger mortgage towards your next house purchase, that way you'd have the same sized deopsit with the flexibility of not having to pay out so much every single month should something come up.