Living costs

jonny411

Hi guys,

Me and my partner are looking at buying our first home this year and I was wondering on the cost of everything. 

Basically my partners credit isn’t great so for the house we want we have been quoted a mortgage price of £860p/m and with this being high I wanted to make sure we can afford it. 

Combined we bring in an income of £2950 per month.  Our personal expenses (car, phone etc) come to around £520 per month. 

I wanted an idea of how much household bills are each month to make sure we can afford it. 

Based on the expense of:

£869 mortgage
£180 council tax
£520 personal expenses 
and however much household bills are, can we afford to live based on our £2959 income?

we haven’t had to deal with bills before so we are unsure how much they usually are so any help with that would be great. 

We are wanting to move into a 3 bed detached and it is just the two of us. 

Apologies for the lengthy post, hope people can help! 

AdrianC

If you've had an AIP from a lender, then they're happy that you can both afford the loan. And they have to be cautious, legally.

£520/mo "personal expenses" could cover a myriad of things of varying triviality and optionality.

Bills tend to vary widely depending on your profligacy with energy, and the efficiency of your property. It's a movable feast.

lees80

You say the mortgage is high but the repayment is relative to the amount borrowed, interest rate of the product and the term it is over. What are those details? Is the mortgage locked in to a fixed rate for X amount of months or years? Can you comfortably afford the payments if or when they go up?

Bills will vary, but you'll have council tax, water rates, gas and elec, TV licence plus insurance. Gas and elec tend to be lower during summer for most people. 

SameOldRoundabout

Gas, electric, water, let’s say around £50 per month each. Home insurance around £20. You should have life or critical illness insurance in place to cover the mortgage should one of you die or become ill, we pay £8 and £25 respectively but that depends on your circumstances. Have you taken food, car insurance, fuel, takeaways, broadband, any pet costs etc into account with your £520? None of us can tell you if you can afford it because we don’t know your spending habits. If you aren’t a wild spender I’d say you’re okay. 

jonny411

AdrianC said:

If you've had an AIP from a lender, then they're happy that you can both afford the loan. And they have to be cautious, legally.

£520/mo "personal expenses" could cover a myriad of things of varying triviality and optionality.

Bills tend to vary widely depending on your profligacy with energy, and the efficiency of your property. It's a movable feast.

Thanks for the response. 

The personal expenses are for the car and it’s insurance, petrol, dogs insurance and phone bills. Thing we we will probably always have. 

We looked a house which is the same build and in the same area on zoopla to get estimated running costs like energy and water and gave ourselves a £250 monthly food budget and we come out with around £700+ leftover. 

I’m just concerned that I haven’t thought of all household cost other than the obvious gas/electric, water, home/life insurance, broadband,tv license that we will have to pay each month. 

Mrsn

I’m not suggesting you have any debt issues but you could fill out a statement of affairs (there’s a template on the debt free forum I believe) and that will list absolutely everything so will give you an idea of what to look out for.

jonny411

lees80 said:

You say the mortgage is high but the repayment is relative to the amount borrowed, interest rate of the product and the term it is over. What are those details? Is the mortgage locked in to a fixed rate for X amount of months or years? Can you comfortably afford the payments if or when they go up?

Bills will vary, but you'll have council tax, water rates, gas and elec, TV licence plus insurance. Gas and elec tend to be lower during summer for most people. 

The mortgage is fixed for two years and the advisor said that we could remortgage after those two years to a high street lender as my girlfriends credit should be better by then. The quote was based on a 35 year term, borrowing around £163,000. 

Like you say gas and electric tend to be lower during the summer and we both work full time so the house will be empty most of the day as well so it shouldn’t be too high anyway. 

youth_leader

I would recommend having a look at You Need A Budget for household expenses.  It's helped me.  I use it to budget my electric, water and sewerage, council tax,  broadband, mobile phone, tv licence, house insurance, dog insurance, personal insurance, car insurance and car tax, savings.  I've not got gas as we are on oil, so have to load the winter payments for a lot more oil as well as wood for the woodburner.  
Are you going to have a separate account for mortgage/bills etc, and keep your own individual accounts?  We used to do this and saved any monies left at the end of the month.

AdrianC

jonny411 said:
The quote was based on a 35 year term, borrowing around £163,000. 

Wah!

35 years...?!?

Playing with the MSE mortgage calc suggests that a 35yr £163k mortgage for £860-odd/mo would be around 5.4%! That's borderline usuary...

If you remortgage in two years time, you'll have repaid just over £3k of the debt. The rest of your £20k+ in payments is interest... Just £120ish/mo is actually going to repayment. That, of course, gives you an indication of the power of overpaying, too, but is mostly just a scare-story about that kind of interest rate. It's more than a quarter higher than most lenders' standard variable rate, which everybody else regards as mildly terrifying. That difference alone is almost what you could be paying in total on the best-buy discounted mortgages.

Seriously - on that kind of rate, I'd be thinking that the lenders were trying to tell me to wait, and that might not be bad advice. I presume your unfamiliarity of the cost of running a household is due to never having moved away from the parental nest? Have you considered renting for a period...? Yes, the dog(s) will make it harder, but it might still be worth considering.

jonny411

AdrianC said:

jonny411 said:
The quote was based on a 35 year term, borrowing around £163,000. 

Wah!

35 years...?!?

Playing with the MSE mortgage calc suggests that a 35yr £163k mortgage for £860-odd/mo would be around 5.4%! That's borderline usuary...

If you remortgage in two years time, you'll have repaid just over £3k of the debt. The rest of your £20k+ in payments is interest... Just £120ish/mo is actually going to repayment. That, of course, gives you an indication of the power of overpaying, too, but is mostly just a scare-story about that kind of interest rate. It's more than a quarter higher than most lenders' standard variable rate, which everybody else regards as mildly terrifying. That difference alone is almost what you could be paying in total on the best-buy discounted mortgages.

Seriously - on that kind of rate, I'd be thinking that the lenders were trying to tell me to wait, and that might not be bad advice. I presume your unfamiliarity of the cost of running a household is due to never having moved away from the parental nest? Have you considered renting for a period...? Yes, the dog(s) will make it harder, but it might still be worth considering.

Thanks for the response. 

I’m concerned about the mortgage as well and that had just come from an AIP at this stage. 

Your right about us moving out from living with parents, but I wouldn’t rent personally. So it’ll either be waiting or going ahead with the purchase. The problem is we are restricted by my partners poor credit score due to a defaulted payment which was a one off and had been paid off.  

It is concerning how much interest we would be paying initially. When we went to remortgage after the two years would we get a significantly lower interest rate if her credit rate improves?

markin

So many break up after the first year living together, Just rent for a year and try again next year.