Mortgage x salary irresponsible!

Thrugelmir

monty-doggy wrote: »

I'm hoping to pay it off early, mostly because the thought of interest rates significantly rising scares me, but again prob listening to too much hype!

Interest rates will rise at some point in the future. That's a certainty. So no harm in overpaying now by a little. As you've only got to repay the debt once. Also will mitigate the impact of future rise.

ACG

monty-doggy wrote: »

I didn't think of it like that. We've kids and car so I guess not as affordable.
But to me £800 to pay council tax, water, gas, electric, phone, insurance, food, travel etc doesn't leave a lot for 'living' and saving.

Depends on chosen lifestyle I guess!

Single persons Council tax is 75%, gas/electric will be minimal as they will most likely be in work all day so only put it on at night. Water is a single person so will be less if on a meter, food will be less as its one person.

As for the 95% mortgages, i have had a couple of enquiries but not many. Im not a huge fan of the 95% mortgages either, but they do have their place.

brit1234

ACG wrote: »

A single person on £20k with no kids or credit commitments why should they not be able to borrow 5.5x income. I bet they have far more disposable income than a couple with 2 kids and a car on finance.

£20k wage = take home pay of £1350 (approx).

£110k mortgage over 25 years = £550.
£800 per month to cover food and bills for a single person is plenty.

£110k mortgage over 35 years = £490 per month.
£860 left over each month.

I would never suggest anyone do 5.5x income (i tend to work to the tune of 4x income to start with) but if they can evidence affordability then i would have no issue doing it.

The figures can stack up if you go through them.

I know one lender gone to 6.5x income in similar circumstances (single person no credit commitments - albeit with a higher income).

That's very well if interest rates are going to continue at 0.5% backed up by continuous QE and funding for lending the complete 35-35 year term. However I think that highly unlikely not even taking into account the high above wage inflation the above causes.

You also highlight another poisonous tentacle of lose/irresponsible lending. That of mortgage terms rising from 25-35 years. It is idiotic lending criteria which fueled the credit crunch and the house price bubble we are re-inflating now.

GMS

brit1234 wrote: »

You also highlight another poisonous tentacle of lose/irresponsible lending. That of mortgage terms rising from 25-35 years. It is idiotic lending criteria which fueled the credit crunch and the house price bubble we are re-inflating now.

What is wrong with taking a 35 year term at age 25? Mortgage would still be repaid prior to retirement and in all probability much earlier.

Would it be better to rent for 35 years?

If a client of mine wanted 35 years I would ensure they were aware of the increased total to be repaid. The fewer years to save for retirement. The burden of a mortgage for longer etc.

However if somebody wanted it then it is their choice. Much better to own a house in retirement than be at the risk of eviction surely?

ACG

brit1234 wrote: »

That's very well if interest rates are going to continue at 0.5% backed up by continuous QE and funding for lending the complete 35-35 year term. However I think that highly unlikely not even taking into account the high above wage inflation the above causes.

You also highlight another poisonous tentacle of lose/irresponsible lending. That of mortgage terms rising from 25-35 years. It is idiotic lending criteria which fueled the credit crunch and the house price bubble we are re-inflating now.

All of your posts are anti mortgages. Your also saying help to buy etc are scams... so i cant take anything you seriously.

As has been said, you could rent for 35 years or purchase over 35 years... at least at the end of one you own the property and you dont have to deal with landlords who can be a pain in the ..... during that period. Its also not uncommon to take out your initial mortgage over a longer period and then reduce it over time.

You mention about interest rates rising - of course that will happen. But its unlikely to happen for a few years by which time promotions/pay rises/moving in with a partner could have happened.

opinions4u

I'm not a fan of high income multiples or long mortgage terms.

The focus is too much on initial affordability (which is part of what drives up house prices and will, inevitably, create another housing boom and bust) rather than long term sustainability.

Having a chunky mortgage when your kids hit university is unhelpful. Having a mortgage when your job becomes too much for your mind or your health as you move into your 50s is restrictive.

Stretching both term and income is asking for trouble later on.

vacheron

I think long term mortgage terms can be a very good thing and have recommended them to two responsible friends recently who have taken them out. If you are responsible and overpay then you can overpay to the 25 year level but can build an overpayment safety buffer and have a lower obligatory payment in times of unexpected financial trouble.

However, promoting them to the more naive simply to allow them to borrow a higher amount is not advisable.

I was offered 5.5x from my mortgage lender during my application, but didn't need that much. I remember the advisor excitedly telling me that we could look at more expensive houses, followed by me rejecting that idea and asking him if they had learned nothing from recent events!

kingstreet

FWIW you only get 5x gross basic salary.

That assumes;-

- no current credit costs
- no children
- a longer term, normally over 22 years
- a basic of over £22k
- no maintenance, shared equity, shared ownership rent etc

and any variable income, such as overtime, bonus etc has to be evidenced over a longer period and if accepted will only see around 50% taken into account.

Although it may be easily visible as 5x income, it's calculated much more comprehensively than that.

WhiteChristmas

Thrugelmir wrote: »

Banks aren't going to risk another PPI scandal that's a certainty.

Your faith is touching. The only certainty is that the banks will do absolutely anything they think they can get away with.

GMS

brit1234 will never buy a property. Even if prices were falling he would never be happy that the bottom of the market had been reached until such point as it began rising again which would then mean he had to wait for the next crash.

In the years he has waited for the perfect situation prices have risen and years of rent has enabled somebody elses property to be paid for and rise in value.

Everything is a scam. Ironically the biggest scam has been joining forces with others and leading people to believe that house prices will drop allowing them to buy for peanuts. Plenty will never achieve the dream of home ownership.

Some people need to view a house as what it should be, i.e a home for them and their family rather than seeing it as an investment.

Choosing a 35 year term at a young age is surely better than being forced into a short term mortgage due to age restraints when the 20 years of abstaining from buying is up and a higher price needs to be paid anyway.