mortgage repayments as a percentage of take home pay

sofarbehind

I am starting to think about applying for a mortgage in the next 6-12 months and would like some sensible MSE views on a reasonable level of borrowing.


I am looking at properties between 115k-120k. At present I have a 10% deposit but hope that this will be at least 15% when I buy. I'm 35, single and earn 40k basic, about 10% overtime on top but I'm ignoring this as it's not guaranteed. I have no debt apart from student loans. The calculators show that I'd be paying about £660/month at an interest rate of 6%. My basic monthly pay is about £2200 after pension contributions. So this would be around a third of my take home pay. Does this sound reasonable? It sounds like such a lot of money to borrow!


I am asking here as my friends and colleagues have all said that I should borrow more and live in a nicer area, which I think is ridiculous and reflects the fact that they have all been gifted large deposits. I am concerned that I may be borrowing too much but can't get them to take me seriously.

Paully232000

We are a couple so maybe you wont think it is comparable, however what we do is look at the total we would be paying out in bills each month and work from this.
Did a budget planner of how much we spend on everything that we need to spend, mortgage, council tax, elec, gas, phone, TV, car tax, insurance etc etc.(in our case nursery bills, childminder, after school clubs etc).

Then work out how much is left for non-essentials, going out, holidays, saving etc and see if this is enough.

sofarbehind

That is a very good idea, I'll do it. I'll have to guestimate some things as I'm currently in a shared house but I should be able to get a decent approximation.

Thrugelmir

A third of net pay is a sensible starting point. There's more to life than a paying a mortgage and maintaining a property. You can always move to a nicer area later on if circumstances allow.

As and when you can. Use the overtime to make overpayments on your mortgage. As in the longer term will make a real difference.

lee111s

I pay my mortgage of £525 on my own and it's about 21% of my take home pay.

dingling68

My monthly amount is 38% of my take home pay but it includes an overpayment, otherwise it would be 31%

JustinR1979

For 4 years mine has been about 55% of take home, and during that time paid £14k loan back too.
Not fun, but had little choice.
A third of take home would be a dream for me

worriedne

Please take the advice from others about overpaying if it's affordable. We have 7 years left on our mortgage, circumstances have changed and we're struggling. If we had overpaid just a little over the "good" years we would be finished now.
Good luck with the house hunting!

sofarbehind

Thanks very much for all of your replies.


I have been playing with the mortgage overpayment calculator and you're so right about the overpayments! Wow. I think the suggestion of using overtime payments for this is a brilliant one. :beer: I should be able to manage this if I am strict with my budget. Which I am trying my best to be as a reformed spendthrift.




Dingling68 this would make my repayment percentage about the same as yours, do you find that this is manageable? I have estimated a budget and it looks possible provided I don't slip back into my old ways.


JustinR1979 I think you should be very proud of your self-discipline, particularly paying back that loan as well. You say you had no choice but it's a real achievement and I'm not sure I'd have managed.

getmore4less

Using % is a rubbish way to work out what is affordable.

do a proper budget an prioritise where you want to spend your money.

do at least a5 year plan covering thing that will use up money

dingling68

sofarbehind wrote: »

Dingling68 this would make my repayment percentage about the same as yours, do you find that this is manageable? I have estimated a budget and it looks possible provided I don't slip back into my old ways.

Evening, as getmore4less says, the percentage of take home pay isn't a very precise way to work out the affordability, but can give you an idea. A full budget is def worth the time spent on it. I am paying this mortgage on my own, and still manage to have a life as well. However this is the second property I have owned and I am a more "mature" person so don't have a wild or expensive lifestyle :rotfl:

My first mortgage was 60% of our joint take home pay :eek: