What is your maximum leverage?

lawlie

Thought I would post this to see how different people feel about this!

What is the maximum leverage ratio (mortgage:annual income) that you would consider?

Obviously, this is going to be very different for a FTB and someone who has moved on a bit and has some equity lying around from already owned property.

The other half and I are saving for a deposit to buy hopefully next year. The aim is to have around £60k to cover deposit and SD.

We will probably end up buying in the £350 - £450k mark. However, that creeping temptation to just move the "max. price" notch on Rightmove got the better of me and I would love one of the apartments at £550k!

Our combined income is £160k at the moment (nearly 3.5x), although I am hoping we will be around £175k next year (3.142x).

Whilst the leverage amount does not seem like a lot, the thought of paying c. £2.5k a month for a one bed flat seems completely ridiculous and I almost out of principle don't want to do it.

Interested to hear people's own experiences and views!

BritishBulldog

Presumably you're in London with those short of prices?My partner and I have just taken on a £250k mortgage on a combined £110k income, so about £1450 per month. This scares the crap out of me, and to be honest it is more than we originally set out to take on, the thought of doubling it? EEK! Obviously it's what you are comfortable with but I wouldn't sleep for the next 25 years! Good luck either way.

somethingcorporate

We have a similar income to yours (slightly lower but of that ball park) and feel like we're taking a gamble on a £300k house but we are naturally very risk averse and have a B2L property that does give us another £150k of exposure if we were to lose the ability to let it.

The thing that would be make me least likely to buy a property over £500k is the stamp duty! £22k for a £550k property!

Fortunately we got the seller (developer) to pay the £10k on our new house!

lawlie

I know it's crazy! And yes, great London prices... the other thing that concerns me is that I feel that London is showing all the signs of a housing bubbles. I don't fancy being stuck in £100k negative equity shortly after I've bought!

I thought 3.5x sounded okay, as you always hear about people going 4x! The sheer figures are scary though, I agree.

@British Bulldog - 2x - that's really good! Good position to be in.

amnblog

Dont get too excited.

A purchase of £550,000 leads to a £22K stamp buty bill leaving you insufficient funds from your 60K for a 10% deposit.

Unless you are considering the Help to Buy scheme I cannot see how this would work.

lawlie

amnblog wrote: »

Dont get too excited.

A purchase of £550,000 leads to a £22K stamp buty bill leaving you insufficient funds from your 60K for a 10% deposit.

Unless you are considering the Help to Buy scheme I cannot see how this would work.

Thanks. I HAD worked that out. The 60k mark is for the 350-450k mark.

I'm just interested to hear what leverage other people are looking at.

amnblog

I suspect you could raise the funding and make the payments but a lot can happen in a year.

BritishBulldog

OP, that is a benefit of living in the North of England. A 3 bedroom detached stone house in the Dales..£287.5k. London prices are mental.