Mortgage question - how much is too much?

always_sunny

for those of you more experienced in getting mortgages... as a FTB, what are the chances of getting a mortgage like 4x time annual salary?
The Decision in Principle seems to suggest I can, but in reality how feasible is it?

I have no other financial commitment, nothing, nada, zippo and technically the repayment is 1/3 of my net income. No adverse credit, always paying on time, blah blah

I am/was planning not to borrow more than 2x but maybe I am starting to think I am too conservative? I don't like debt too much so I prefer to pay cash when I can!

amnblog

It doesn't quite work like that but a ball park if 4x salary is possible for many borrowers.

Focus less about the mortgage and more about buying the best property you can within what you can afford.

MFWannabe

Yes 4 x salary is possible; but you need to decide and make the decision on what you feel most comfortable spending; just because you can borrow more doesn't mean you have to or are comfortable to

amnblog

I am not suggested that you should be uncomfortable. I am suggesting that paying extra for the right location and or the better quality property will pay dividends later (if affordable).

HappyMJ

always_sunny wrote: »

for those of you more experienced in getting mortgages... as a FTB, what are the chances of getting a mortgage like 4x time annual salary?
The Decision in Principle seems to suggest I can, but in reality how feasible is it?

I have no other financial commitment, nothing, nada, zippo and technically the repayment is 1/3 of my net income. No adverse credit, always paying on time, blah blah

I am/was planning not to borrow more than 2x but maybe I am starting to think I am too conservative? I don't like debt too much so I prefer to pay cash when I can!

As you've got no other commitments at all then 4x income is affordable (as long as you're not on a very low wage).

I would say if you earned £25,000 then borrowing £100,000 is quite easily doable. Interest would only be about £4,000 a year which is only 16% of your gross pay or 20% of your take home pay. Anything you pay on top of the interest charged is reducing your capital, reducing the term and reducing the cost of buying the house.

getmore4less

For being comfortable it is about what you will have left to service the debt

Someone living a £25k lifestyle on £25k will have a lot less than someone on £50k

Owning changes you spend profile.
Every one has commitments, you have to get to work, eat, buy clothes, no phone, TV or internet?

The other thing to look as moving costs money if you can avoid a future move buying something you grow into might be worth the extra.

haf1

but in reality how feasible is it?

always_sunny I would try and do a monthly budget, listing your expenses now and with a mortgage. Remember that even when you are no longer saving for a deposit, you will need to have money put aside, e.g. for repairs, and you will probably still want to go on vacation? And interest rates will, eventually, rise.

Our bank offered 4.5 x salary on their DiP, but advised that we would be more likely to get 3.5 x salary, based on affordability. We needed only about 2.5x salary, but now have higher travel costs plus repairs/refurbishing the new house.

Hope this helps

always_sunny

Thank you... the reason for asking is because I am finding shortage of smaller properties, though larger properties with higher prices seem to be there. Ideally I wanted to first buy something small and then eventually increase size but maybe I can do that right away.

I am on a good wage, no other commitments like car of kids (and none in the foreseeable future) and no dependants either. I spend no more than 40% of my income for all expenses (rent, commute, eat, phone, the lot)

I am not a big spender and even though I will be going solo on the mortgage, I share expenses with my partner. If we were to apply together (we're not going) then it'd only be 2.5x our income.

My views on borrowing are very conservative... so I was wondering if 4x annual wage is normalish or very rare!

Thrugelmir

always_sunny wrote: »

My views on borrowing are very conservative... so I was wondering if 4x annual wage is normalish or very rare!

Taken as a whole across the entire mortgage market. The average multiple for FTB's is consistantly around 3.2x borrowers income.

To repeat what others have said draw up a budget. Much depends on your personal circumstances as to what's affordable. Bigger properties come with higher costs. Likewise older properties may well require a higher level of maintenance spend.

Finally do be complacent about interest rates remaining this low for the entire term of the mortgage.

Your first home may not be perfect but you'll be on the property ladder.

cns06

If you are young and have good prospects then you should borrow more rather than less IMHO.
Its only if you have little chance of larger salary or are older should you be conservative. Borrowing money is the cheapest it has ever been right now. Take advantage of that. Don't be stupid (sounds like you wont) but defo look to get into a better house which is going to appreciate faster and also be easier to sell should you need too.

sebtomato

Do you think the current property market is the perfect timing to overstretch yourself now, and borrow above your comfort level?

I think we have a significant chance of heading for a market correction (given BTL properties likely to come on the market for instance), and you don't want to find yourself in negative equity for too long (in case you need to move for instance)...

I think you are buying at the top of the market now.