What % of salary is sensible for mortgage payments?

noisla

Is a £755 pcm mortgage payment ridiculously huge?

I'm a FTB, been saving up for ages and wondering whether to stretch myself on a £240k house. I'd have a 25% deposit and mortgage repayments fixed for 2 years at £755. I estimate bills at around £250 pcm and potential rental income of £400 a month - but I am not including the rental income in my calculations, to be prudent. My gross monthly salary is around £4,500 and net £3,000 (prudent estimates/averages). Currently I pay £450 pcm rent+bills, and save £1-2k monthly, depending on holidays and big purchases. If I got stuck, I could even rent out another bedroom in the house i.e. £800 a month rental income, although then it would start being taxed.

Does this sound a ridiculous level of mortgage to be saddled with? I am struggling to find a property I like at any budget, and this one really fits the bill (a modest terrace but with access to a yard for storage). But these numbers just all seem so big. The bank tells me they'd lend up to £270k, which seems totally mad.

I would be interested to know what % of my salary could be take up by mortgage repayments - in a sensible world. I can only find old articled/posts on this (e.g. directed at people on interest only mortgages)

I would appreciate any voices of reason! thanks

redrabbit29

Woah, that's very good considering your monthly earnings.

I earn around £1800 a month net and my mortgage is £700 + bills of around £300 a month.

If I can afford that, based on your earnings and outgoings you'd easily afford it.

opinions4u

Very rough guide, but once you start heading over 30% of bet pay for mortgage / rent you may find that you're stretching yourself.

Building on that, budget on a 5% higher interest rate.

HAMISH_MCTAVISH

The long term average for percentage of net after tax pay spent on mortgages for FTB-s is 38%.

In 2007, with both prices and interest rates at the very peak of their cycle, it was around 50%

It's around 29% today, with both average prices and interest rates far lower than 2007.

And it peaked in 1990 at 68%.

In terms of mortgage rates, there is virtually zero prospect of those rising much from the current average of 3.5% over the next 2-3 years.

However as the economic recovery continues, they can and should rise back to more normal levels, where the average mortgage rate might be more like 5% or so.

sebtomato

So by renting two rooms in your house, you could pay the monthly mortgage???

Seems to be a bit strange, and also the rent would be taxable, but if it's correct, then you would basically get a property for free (assuming interest rates are staying low, and house maintenance/repairs does not cost you too much)

egoode

It appears to be about 25% of your take home pay which seems affordable to me. Check how much it would cost if interest rates went up by 4-5% more than they are currently and make sure you are still comfortable with that as well. It's great you can rent out rooms as that will also give you some additional income to help pay off the mortgage as well.

martinsurrey

%age of salary means nothing...

spending 30% of £10k a year (net) only leaves £7k for food/bills.

spending 30% of £100k a year (net) leaves £70k for food/bills

OP is on £55k a year, so a higher percentage is easily affordable, as he still only has one mouth to feed, and has one pair of feet so donest need extra pairs of shoes, and despite what some people may want, his electricity costs the same as everyone elses!

you can easily afford this house, make sure you have a nest egg to get you through 6 months incase you lose your job (and this can be supplemented by lodgers) and you're good to go (IMO)

StuC75

Looks very affordable on your figures - if rates did go up then so would your payments - but so would general housing costs ~ meaning charge more for renting a room or 2 out..

But I would say that a 240k property is likely to be quite modest (i.e. were not talking about a mansion here!),, so I would question whether you would get the same enjoyment from the house with 1/2 lodgers as well...

ch3101

If I were you I wouldn't be worried about it. I'd also overpay a fair bit.

Considering you currently pay 450 for rent and bills, you save 1k at least so you could theoretically just pay 14-1500 a month for mortgage and bills then save whatever else on top?

jamesd

Given your income that seems entirely affordable. Whether it is actually as easily affordable as it appears will depend on how you use the rest of your money. If you have expensive car payments, lots of expensive evenings out and such it could be hard to deal with even though it doesn't have to be.

There is no fixed percentage of income for mortgage payments. At low income levels the restriction is the minimal costs of living and those make the percentage quite low. As income rises it gradually depends more on what other spending you do and that varies greatly between people. Someone with a high commitment to owning a property or paying quickly could pay far more as a percentage than someone who isn't so committed.

thriftylass

Of course. We have that mortgage on a joint income of £3300 minus £1000 childcare and can afford it (well without being able to save loads or go out much, but I still call that affordable). It all depends what your remaining money goes on, what kind of life style you'd like to maintain.