How much mortgage can I afford?

Jhoney_2

Malmo wrote: »

Not quite true. It depends on what zone you are interested in, what your specific requirements are and how closely your expectations align with reality.

800 - 900K would get you a very decent property even close to the centre (within 15-20 mins on the Tube), unless you're thinking of the sort of properties along Bishop's Avenue or near Hampstead Heath or something.

Without knowing more about your requirements, here are some examples:
Example 1 - NW1
Example 2 - SW11
Example 3 - E3

I would be inclined to purchase a large family home without a mortgage.

Great examples, though there are cheaper. Of those, e.g 2 is the best area/property but north facing so wouldn't suit everybody.

I don't think this is a serious post tbh but love the thread!

audigex

In_For_A_Penny wrote: »

Forgive my cynicism but you’re a millionaire banker asking about mortgage affordability on MSE?

I'm with this....

Who the hell earns £250k in the Banking sector, has £1m in the bank, but doesn't have a clue how much house they can afford?

Seems like a wind up to me. That said, I lost any hope that bankers understood money about 8 years ago.

Buy a home outright with the cash you have now - £1m will get you a LOT of home. Save up as much of the rest of your income as you can... with no mortgage that should be easy. Even if you spend £2k a month (Which is £200 more than most people in the country earn, even before they pay their mortgage), you could live a fairly luxurious lifestyle and still put away £72k/year. Include your bonus and you could put away £150k+.

Do that for 5 years, plus interest, and you should be able to buy a much bigger house even in London. Then work until you can't be bothered any more, sell your house, move somewhere cheaper, buy a block of flats up North and retire on the rental income.

Let_Us_See

lonestar79 wrote: »

Hi all,

I will dive straight in. I am 35 years old and I work in banking in London. Completely debt free. Never owned a house. No wife/kids yet either. I saved up £1 million over the last 10 years. My current base salary is £160K (becomes 96K after tax) and I get around £100-120K bonus every year (used to be higher but not anymore).

The question is, how much of a mortgage could I afford? My thinking is:

Out of my £1m saving, I could use £900K as down payment and keep 100K in the bank as emergency fund. If I take £650K mortgage for 25 years, I could buy a 4 bedroom house at a relatively central area in London. However this mortgage is 4 times my base salary. And obviously there is no guarantee that I will keep earning the bonus every year. Am I over stretching myself with this amount of mortgage? In case I lost my job, I could rely on the 100K emergency fund and also I could rent out 2 bedrooms of the house to help with mortgage payments. Monthly mortgage payments will be roughly 3200 and renting the 2 bedrooms could pay half of this amount... Nonetheless, 650K is a large amount and I am questioning whether I am taking too much risk here. If I am taking too much risk, how much mortgage is the sensible amount?

In terms of job security, I work in a risky job and there is some chance that I could lose the job. I do feel confident that I could find another job within a few months. My feeling is that I can assume a base salary of 100-120K in compromise job.

Appreciate any help.

To answer your question, and not digress or inflict my personal property and financial values on you, it is perfectly acceptable proposition with 4 x income an everyday event.

cns06

Book flight to Thailand, never come back. /thread.

Landofwood

If I had OP's profession and presumed lifestyle, I wouldn't be interested in any of the properties listed so far.

The best thing that OP can do is stretch himself to the max, buy the best possible property in the best possible location, with the biggest possible mortgage. 10% HPI on a luxurious £2m apartment overlooking the Thames in central London is far more appealing than 5% HPI on a £1m 3-bed terrace on the outskirts of London.

He can always sell.

Cornucopia

This is a good point.

I suppose the question (that we cannot answer) is how realistic are his issues about job security?

lonestar79

Thank you all for your replies so far. I appreciate all opinions and viewpoints.

Can I please give you a bit more colour? I am not looking for a super central luxury bachelor pad. I am happy to be in Zone 2. Ideally I want to have a freehold, 3-4 bedroom victorian family home with a small garden. It would be fantastic if it is on a nice tree-lined street where the houses are well looked after (recently painted homes, flowers outside etc... A nice area you want to call home). For example, most streets in Queens Park are lovely like that whereas Clapham, Caledonian Road or E3 feel much more worn down or industrial etc. It feels strange to pay 1m and end up living in that kind of area. Hope this explains where I am coming from. If you want a family home in Queens Park, the lowest price is 1.4-1.5million and actually most 4 bedroom houses are around 1.7-1.9m. That is Zone 2 by the way.

Most of my friends (in the finance world, around my age) have coupled up with a boyfriend/girlfriend who is also in finance and bought a 1.4-1.5m house. They are relying on the security coming from 2 separate pay checks. I haven't been lucky to couple up with someone who earns similar to me. So I am on my own in this.

Yes, I do have insecurities about my job. If I lose my job, I am confident that I have the skills to find at least a lower profile job which would pay me 100K all-in (I am being conservative). However, in such a scenario, it would take me 15-20 years to pay the 600K mortgage.

One idea is to do a job search now to get a better feel for my chances in the job market. This would probably take me 5-6 months though. My worry is that house prices will start going up again after the election results. My dream home is currently 1.4-1.5m range. If this price goes up by 10%, that is a 150K price increase. Currently, I am saving about 100K a year. So I am losing money by waiting...

Sorry for the long winded email. I will put all my savings into one big investment and hence all these deep thoughts. Thanks for listening.

lonestar79

Regarding job security, yes my job is risky. There is probably 20-25% chance that I could be made redundant in a given year. I work very hard but risk of losing a job is always there.

racing_blue

I googled those houses near Queens Park. Nice. I'd pay £2 million for one.

But only if I had another few million in the bank, a few million in investments, and a maxed out pension.

As this is not the case- you're safe for the moment.

Jhoney_2

If your peers are buying together at 1.4m - it suggests you should be looking at 0.7m as a singleton. I appreciate that you have 1m in the bank, but given your own apprehension, perhaps you are stretching yourself unrealistically.

If you do see it as something you should do, I would only lend what you would have mostly on hand in savings to pay back should your job security fears come to fruition - along with a 6months contingency fund.

Aspirations/job security etc is standard for everyone. The figures may be different, but the concerns are the same.

Good luck with it, though.