Single parent mortgage

Thurlow40

In a one income household is a mortgage that’s around 5.5 your income somethIng that would worry you if the repayments where totally affordable? Would be around 65% LTV.
My young son and I are in a tiny house in a quite expensive area, to increase my mortgage by another £30k would give us some much needed space but is it wise?
Would it concern you?

AnotherJoe

Can you actually get a 5.5x mortage? Or have you just worked out that's what you'd like to get?

Thurlow40

Yes, I’ve had an agreement in principle

Mutton_Geoff

If it’s only affordable at current interest rates, you might want to pressure test yourself at higher rates. In fact the banks may do that for you.

How high? I was paying 15% in the 1980s but I’d say 5% is a more realistic long term rate and only fell below this level just over a decade ago as quantative easing (printing money) took over.

https://www.mortgagestrategy.co.uk/historical-interest-rates-uk/

Thurlow40

I hadn’t even considered that, good idea! Thank you

kinger101

A word of caution. If it's a fixed or discounted rate, check what the the repayments would be at the SVR. Then stress test it by adding 2-3%.

While you may be able to get 5.5x income now, there's a very high chance this or even 5x might not be available when you come to the end of the discounted period. Meaning you could be lock in at SVR.

Socajam

Mutton_Geoff wrote: »

If it’s only affordable at current interest rates, you might want to pressure test yourself at higher rates. In fact the banks may do that for you.

How high? I was paying 15% in the 1980s but I’d say 5% is a more realistic long term rate and only fell below this level just over a decade ago as quantative easing (printing money) took over.

https://www.mortgagestrategy.co.uk/historical-interest-rates-uk/

I remember the 1980s well. Those mortgage rates @15% were hell.

TheGardener

Socajam wrote: »

I remember the 1980s well. Those mortgage rates @15% were hell.

yes, but I was getting 10 or 11% on my savings - can you imagine getting that now!:rotfl:

AnotherJoe

kinger101 wrote: »

A word of caution. If it's a fixed or discounted rate, check what the the repayments would be at the SVR. Then stress test it by adding 2-3%.

While you may be able to get 5.5x income now, there's a very high chance this or even 5x might not be available when you come to the end of the discounted period. Meaning you could be lock in at SVR.

Surely OP is likely to be able to go to a retention product with no further checks?

Thurlow40

Thanks all, I checked affordability of my current mortgage based on 5% interest rates and it shocked me.... and then the increase if I do go ahead and move. It wasn’t a huge hike but it’s still got me thinking.
It’s more the size of the debt that worries me... I don’t really know why.
I’m certain it’s affordable based on things as they are now, comfortably so, I’m just curious as to what other single people do where there’s no obvious way to bring more money in if things get tight, my son is a few years off his first paper round

Wobblydeb

Thurlow40 wrote: »

In a one income household is a mortgage that’s around 5.5 your income somethIng that would worry you if the repayments where totally affordable? Would be around 65% LTV.
My young son and I are in a tiny house in a quite expensive area, to increase my mortgage by another £30k would give us some much needed space but is it wise?
Would it concern you?

The ability to survive interest rate increases depends upon your income. Say you earn £20k per annum and borrow £110k. On a 25yr repayment at 2.99%, you will be left with about £910 per month to live on after paying your mortgage. If rates go up to 4.99% that will drop to £790.

Now let's say your salary is £50k and you borrow £275k. The mortgage is massive, but you've now got £1,800 left each month to live on .... or £1,520 if rates go up to 4.99%.

I'm curious though - in running through some numbers I cannot square 5.5 times income with "totally affordable" repayments. Have you got another source of income, such as child maintenance? Or are you on an extremely low interest payment or long period on your existing mortgage?

Whichever way you go, I would certainly look at income protection insurance so that if you are ill, or made redundant you can still afford to pay your mortgage.