How much mortgage is too much

rockall81

Hi,

First of all apologies if this question looks vague.

But, person i know owns two houses, both mortgaged and total mortgage of 550K.

He is of age 32 to 33 ish.

Both are independent and freehold properties. Just thought of asking whether the mortgage amount on just two homes is too much?

Thanks for the help in advance?

kingstreet

Without knowing the income position of the person concerned and if either property is let and self-financing there's little point in speculating.

The stock answer is as much as you can afford.

HappyMJ

rockall81 wrote: »

Hi,

First of all apologies if this question looks vague.

But, person i know owns two houses, both mortgaged and total mortgage of 550K.

He is of age 32 to 33 ish.

Both are independent and freehold properties. Just thought of asking whether the mortgage amount on just two homes is too much?

Thanks for the help in advance?

It depends on the bank some banks have a maximum lending limit of a couple million. Your friend can always go elsewhere to borrow more.

rockall81

Person earns 60K a year, one is buy to let roughly getting 1250 month and another is where he lives at the moment

Thrugelmir

Depends on one's attitude to risk. Borrowing £550k on a £60k income is subject to what if....................?

martinsurrey

Thrugelmir wrote: »

Depends on one's attitude to risk. Borrowing £550k on a £60k income is subject to what if....................?

exactly,

£60k is £42k per year after tax, not including the rental income.

£550k is £27.5K interest @5%,

if these are 60% LTV mortgages, I might be comfortable (with £400k in equity). If they are 90% mortgages, I'd not be sleeping.

getmore4less

rockall81 wrote: »

Person earns 60K a year, one is buy to let roughly getting 1250 month and another is where he lives at the moment

Looks OK @ 5% after mortgage interest is paid probably has around £2500pm to live on and create equity(pay down capital).

if lending is on a lower rate say 3% that would be closer to £3000pm.

rent(£1250) + £1kpm will have over 1/2 the debt paid off in 20y

getmore4less

Another angle is if the rental mortgage is say £250k@5% and rent goes up 1% per year(inflation). starting at £1250pm then 1/2 the mortgage is paid off in 20years @ 2% inflation 3/4 paid off.