Potential mortgages so much smaller with financial commitments

Lungboy

I'm not really looking at moving but was just playing around with a mortgage calculator as there are redundancies going on at work and thought i'd see what we could borrow if the worst happened. I was struck by the huge difference that having fixed costs makes to any mortgage offer, even when net income after costs is identical. For example, £30k annual wage with £500 a month childcare cost (so £24000 a year net of childcare) might give a suggested mortgage available of £60k to £70k depending on which calculator I use, whereas a £24k annual wage with zero childcare cost (same net as above) gives an estimate of £90k to £107k. I was wondering what the reasoning is behind such a huge variation when net income is the same.

ACG

£30k per year is £2,000 a month after tax (give or take). £1500 available after child care.
£24k per year is £1650 a month after tax (give or take). £1650 after £0 child care.

Lungboy

Ah yes, good old tax. Silly me. However, just £150 a month drop in wage can give a £30k to £40k drop in mortgage, but when I add an extra £150 a month to the wage it doesn't come even close to adding £30k to the top end of what's borrowable.

Thrugelmir

Children cost more than childcare alone.


Besides which childcare is paid out of after tax income. Therefore your £30k pre tax figure is far lower after a net £500 deduction. Than a £24k gross salary.

Actual difference between the salaries is a net £340 per month. A shortfall of £160 for the person with childcare to pay.