£950 monthly mortgage payments- too much?

abkb

Hi everyone,

Firstly a big thank you- I have been a long time lurker here (particularly mortgages and endowments/house buying) and have picked up lots of very helpful information.

However, any advice regarding my potential monthly mortgage payments would be much appreciated.

We have a combined household income of £** p/a, which equates to £** p/m AFTER tax/NI/pension contributions etc.

For the type of house we would like in our area, we are looking at monthly mortgage payments of around £950 for 35 years. Is this unreasonable?

I understand it may be hard to say, and it is a personal decision, but would you be happy with this? What I would say is that in a couple of years time we hope to have children, meaning my husband would drop down to 3 days a week, whilst I would continue to work full-time as the higher earner. This would mean worst case scenario that our monthly income after tax etc would be £**. However, my husband has been given a career development opportunity so it is more than likely that his wage would increase, together with mine.

Neither OH or I are big spenders, and are very careful with our money, so this is a massive deal and we want to go into it with our eyes open. At the moment we pay £650 in rent p/m and so an extra £300 p/m wouldn't be *that* much more, but I'm just having a panic about interest rates rising etc, and so any advice would be much appreciated.

Thank you in advance!

shop-to-drop

That sounds very do able to me.

monty-doggy

35 years is a huge commitment. How will you cope if and when the interest Rate rises?

On your income I'd say you can afford it but you need to be honest about what you want out of life too I.e holidays, children, decorating etc and then see how much money you will have left.
Also find out costs of
Council tax
Electric
Gas
Water
Insurance
Renovation

This should make it easier to decide

ohit

Do not know about the other parts of your finances - the mortgage payment part alone looks very good.
Just to check - this is a repayment mortgage?

With healthy finances that you have, consider over payments on the mortgage.

dimbo61

So take a 5 year offset fixed rate mortgage for security !
Do you have a good deposit ?
Why are you looking at 35 years and what age will you and your other half be then ?
I would overpay or save into the offset while both of you are working full time .

shortchanged_2

The only thing I would say is don't underestimate the cost of having children has on your household income/expenditure.

The figures you are quoting sound reasonable with the mortgage slightly less than 30% of your household income, but bear in mind this probably is based on the current low interest rates and there is obviously the potential that your household income could go down and at the same time your expenditure will increase with children.

Basically just do your sums to see if you are comfortable with loss of earnings and increased expenditure. You are obviously taking out quite a substantial mortgage based on the monthly payment over the time you are taking it I'm guessing around £230,000, so bear in mind interest rate rises will be quite significant at that level.

abkb

Thank you so much everyone. Based on a £950 p/m mortgage and considering bills etc (we have done a detailed breakdown) we would have £1k 'spare' per month. Obviously this is without children in the equation, but this is also not considering my guaranteed wage increase, and my husband's likely increase.

The £950 p/m mortgage payment is based on borrowing £190,000 at a rate of 4.99% (5% deposit Help to Buy, with Natwest or RBS). We can probably go with a 10% deposit so this is worst case scenario.

We are thinking of going with 35 years purely to decrease the monthly payments (although I understand that this obviously increases the overall amount we actually pay back), and then making over payments where we can. This isn't set in stone though.

I am 25 and hubby is 26, so we will be around 60 years old by the time we paid off a 35 yr mortgage.

As I mentioned, we are very careful with money- we have had a fabulous wedding and honeymoon, our holidays are trips to Cornwall with our dogs, and so the spend we really need to consider is children. The 2 houses that we like don't need any renovation or decoration, they are very much decorated to our taste.

Any more thoughts are very much welcomed!

Kynthia

I think it sounds reasonable as I'm currently looking at something similar, although I'm terrified as it's hard to predict what a baby will do to our income and outgoings when it's not here yet but coming soon. The unpaid element of maternity leave is terrifying when your the bigger earner and you're taking out a new mortgage!

Yes you need to factor in reasonable risks and mitigate them where you can, but no-one would do anything if they put too much weight into unlikely risks and extreme worst case scenarios. So think about whether you would survive and not lose the house, even if it was tough for a while or you had to take in a lodger, if interest rates hit 7%, if one of you was unemployed for 6 months, if your OH went part time, etc? If the market dropped temporarily and you couldn't sell, would you be happy in the place you buy for at least the next 5 years (you won't quickly outgrow it or hate the area), and is it rentable should it come to that (such as you need to move and it won't sell or you can't afford it and move back with family)?

I'm currently deciding whether to have fixed, variable, or fixed offset and how long for. I want to fix for 5 years as our income is likely to decrease over that time and I don't want the risk of my repayments increasing even slightly. However I'm not sure I want to pay the extra on repayments in order to fix for 10 years, especially when our LTV will be lower in 5 years meaning we could get another good deal even if interest rates are higher. I'm also liking having an offset during that 5 years as we are likely to still have savings, as we aren't using all our money for a deposit due to maternity leave and upcoming redundancy concerns. Yet while being accessible should we need them these savings will still reduce our mortgage like an overpayment. So you'll need to consider your risk appetite for the next few years, what you think you're income will do and how tight things will be in order to choose the best product for you.

scott_lithgows

We were paying 780 for 5 years there,its down to 715 now,thats on a joint of 41k.
We stayed full time at work as when the kids go to school its never easy to get the hours back at work.

swgl

@abkb: I'm on less than that - single mother with one child - and my mortgage is £1200 (soon to be £1000ish). 23 years left on the mortgage. I'm not a big spender and I don't have any debt aside from the mortgage. I don't have savings but I do have mortgage protection insurance that covers unemployment (and also my employer offers PHI - it covers sickness and accidents). And I also contribute to a pension plan, on the top of my employer's contributions.

As for lifstyle, I can afford traveling abroad roughly once a year. My child is at a state school but does plenty of afterschool activities. The only thing I cut back on - significantly - is eating out and takeaways - I just don't do it anymore, unless it's a very special occasion.

swgl

ps. I would go for 25 years if I were you.