How much would you borrow?

Accountant_Kerry

Hi all,
I am looking at moving in the medium term.

My question is really regardless of what the bank will lend you mortgage wise how much does everyone feel is a comfortable amount to have as a mortgage either in income multiples or in respect of mortgage payments as a percentage of income?

I am a bit nervous using some of the mortgage calculators on how much is the max mortgage companies may lend me, just because they 'will' doesn't mean you 'should', right?

getmore4less

What can you afford

Income multiple and %of take home are personal.

Accountant_Kerry

getmore4less wrote: »

What can you afford

Income multiple and %of take home are personal.

Agreed I guess I am looking for general views on what people feel comfortable with.
I would be nervous of being 1/4 of a million pounds in debt for example just as it seems a massive amount

getmore4less

£250k is easy for someone on £60k spending £20k on living, a bit harder if they are spending £40k on living.

There is no average person.

miss_undastood

We took out 308k in 2013 and it scared me
70% ltv and about 5x our joint income (the online calculators wouldn’t give us what we needed to borrow)

Went and spoke to the mortgage advisor and showed we could afford it, did a full i&e with them (and we have no other debt)

9 months after completing I went on maternity leave though (oops)

5 years later we owe 225k (50% of purchase price possibly now 40% ltv) which is 4 x our salary when we took out the mortgage. Income is similar now (I work PT and dh has had a payrise)

Technically your pay rises with inflation but the value of the mortgage doesn’t. So if you can afford it now in theory it becomes more affordable over time.

enthusiasticsaver

It is different for everyone but personally I would not feel happy with a monthly repayment of any more than 30% of monthly income. Bear in mind interest rates could rise so that needs to be costed in just in case.

20vt-rs

Its a difficult one because everyone person / couple have different lifestyles, how many kids, times they eat out, go on holiday etc... There is a rule of thumb I read somewhere that it should be between 25-35%, but again that's just a guide.

For reference, my mortgage min payment is 21% of my salary, it's dropped since I took it out due around 14 years ago to rate changes (I started at 5.79% and that was a good deal at the time!), now it's at 1.94% making the min payment 21% of salary, my salary has also increased but on the other hand my wife is now part time and we have a little one, so things change.

Whilst we have no other debt, I am making hay whilst interest rates are low and paying off 47% of my salary to the mortgage (via over-payment), with the goal to clear it asap. if you can fix your rate for a longer term this gives you peace of mind.

I think you need to look at all variables, not the percentages and work out whats affordable, what may seem a struggle now will get easier, I know if has for us and others on here whop say the same.

Funnily enough we are also looking at moving, so I get your concerns over affordability, especially when maxing out potential borrowing & time. Good luck!

DrSpendLittle

Just going through these thoughts right now, so a timely post!

We're looking to move soon and are currently weighing up our options.

We've see a few houses that would require use to have a mortgage payment of 29% of our net joint monthly income. We'd look to take it on a 5 year fix at (fingers crossed) around 1.99% with a LTV of 72.6%.

We each get a 2.9% annual payrise and we'd have no other consumer debt when we move.

Bit nervous of the income:repayment ratio. We're able to service our current mortgage with just one salary so have been very comfortable for quite some time.

What works for one won't work for the other.

Good posts from others above!

Thrugelmir

Accountant_Kerry wrote: »

Agreed I guess I am looking for general views on what people feel comfortable with.
I would be nervous of being 1/4 of a million pounds in debt for example just as it seems a massive amount

Then overpay the mortgage. Rather than spend money on takeaway coffees for example. Take control of your own destiny.

foxy-stoat

I think you should focus on the LTV % - I would be very uneasy about taking out anything higher than a 90% mortgage in this market regardless of income to repayment percentages.

10% is not enough in a property if the market should take a slight dive for example.

As for how much you should borrow - the lenders normally wont let you borrow what they think is unsustainable - that figure is normally lower than yours.

user1168934

I am looking to move in the near future. I asked my mortgage broker exactly that a few weeks ago and his reply was that most people keep the monthly payments below 30% of their income and it works for them. Personally I like to keep it below 20%.

The last time I bought I borrowed less than 3 times my income. This time I am hoping not to go above 3.5 times. Admittedly my place is a lot smaller than some friends' but then my mortgage payments are so reasonable I have never had to remember when they go out of my account.


You could take a longer term for mortgage to keep monthly payments low and make overpayments as and when you can. This has worked well for me in the past.


In terms of LTV, keep as high equity as you can. IMO at least have 25-30% equity if you can. You might have to compromise on the size or location but the everyday peace of mind of not having to worry about any payments is well worth it.


I guess you will have to make up your own mind and see what you are comfortable with.