How much is too much?

amnblog

Zippeh wrote: »

This seems mental to us.

Perhaps there is a message in that statement.

Zippeh

amnblog wrote: »

Perhaps there is a message in that statement.

I think you're right. I was mainly interested to see what other people consider "acceptable" levels of mortgage. We've brought our mortgage down from £125k to £88k in six years by overpaying, but I still feel quite indebted. But then I wonder if I'm too cautious, and if it is actually ok to borrow more to get the house you want. Otherwise, how can people ever hope to "trade up"?

Paully232000

3 x your joint salary doesn't seem too much to me unless of course you have several children who all go to nursery for example.

We have one child at nursery and our mortgage stands at just under 3x our joint salary and we don't struggle at all with the payments etc. We do have a few years savings too which helps, but even without this we have enough to add to the savings each month.

NW_London

£440k with 17 years to go but with an impending house move and a bigger mortgage, it looks like I'll have to extend the term a few years.

When reading threads like this it reminds me how stupidly big my mortgage actually is.

silvercar

NW_London wrote: »

£440k with 17 years to go but with an impending house move and a bigger mortgage, it looks like I'll have to extend the term a few years.

When reading threads like this it reminds me how stupidly big my mortgage actually is.

London is not like the rest of the country.

Thrugelmir

andyfromotley wrote: »

Well at 3% your mortgage payment will come out at about £1100

3% interest rates for 25 years? I would suggest this to be unlikely.

Goldiegirl

Zippeh wrote: »

I was wondering what kind of levels other people are mortgaged up to.

I'd suggest that you don't worry about what other peoples mortgages, and concentrate on your own.


Firstly, find out how much you can borrow and then consider if you are comfortable with it. If you aren't then don't proceed. It doesn't matter what the size of Bill Bloggs' mortgage down the road is.


For what it's worth, I worked for a major mortgage lender up until 5 years ago, and even at that time people were being granted mortgages of 2 million or more. So looking at it that way, 225k is a drop in the ocean. But that has nothing to do with your situation - do what you are happy with

NW_London

silvercar wrote: »

London is not like the rest of the country.

Yes you're right, but it's still a stupidly large mortgage and I'd swap it for a smaller mortgage outside of London if it was feasible.

jamesd

Zippeh wrote: »

Im 33 my wife is 35 and we earn 40k and 35k respectively. Our mortgage stands at 88k with 19yrs left. We've seen a house that we like that would take our mortgage up to 225k. This seems mental to us so I was wondering what kind of levels other people are mortgaged up to.

The amount doesn't seem unreasonable given your incomes if you think that the house really is buying you £137k more happiness compared to say spending an extra £137/25 = £5.48k plus saved interest each year on other things.

I suggest that you get the longest loan term possible. This is mainly to give you maximum repayment flexibility since you can always pay more without hassle but paying less is trouble.

Then I suggest that you consider using pension contributions as one way to pay off the mortgage earlier, since the combination of likely growth and tax relief will be a more efficient way than overpaying directly. Given your ages pension money probably would not be available to you until age 57, not the current 55. If either of you is in a salary sacrifice pension scheme this is an even better deal due to the extra NI saving.

If you like the idea of overpaying on the mortgage it's best to do the pension investing first, to maximise the likely benefit of the higher compound growth rate than the mortgage interest rate. In say ten to fifteen years after inflation has increased your incomes without increasing the amount overpaid on the mortgage you could start to overpay with the extra income, as well as increasing the pension contributions. Or just use more pension contributions if early retirement is an objective.

What you're considering doing with this purchase instead of using the money for something else is sacrificing holidays, early retirement and such to get the house.

For the early retirement alternative, each £1,000 you spend at age 35 costs you £96 of annual income increasing with inflation for life starting at age 55. That's assuming 4.5% real investment growth, meaning after both inflation and about 0.5% charges. I ignored the pension tax relief in this, that makes it worth more.

I purchased a few years ago at an income multiple a bit over 1 that's now well below 1. Interest only. I wanted to maximise the efficiency of my housing and maximise my ability to become able to live if I couldn't work then retire early if I wanted to. The 25% tax free lump sum value of my pensions is currently about 92% of my mortgage value courtesy of very determined pension contributions, and I've twice the mortgage value in non-pension investments. I don't place a high value on best possible home, more on efficiency and not having to work sooner. I'm also relatively close to age 55 and the pension money can allow me to upgrade more efficiently, having benefited from the pension tax relief to increase my equity more efficiently.

This house has that cost. But what could you get for less in a cheaper area? Maybe a little less convenient for travel or just outside a town or village instead of in it? A few miles can make a really big price difference without much convenience cost.

quidsy

I'll be getting a mortgage of around 250k in the next couple of years with about 150 cash down, so a house of 400k. I can afford to pay a rate up to 7% on that borrowing without it killing me but I would prefer not too. You have to decided what you are comfortable with & if you plan to try to clear it earlier. my 250k will be gone in 10 years plan willing so for me it is an affordable risk. If the plan changes, we sell, downsize & go mortgage free.