Know how much I can get, but how much mortgage should I get?

JeffMason

Thrugelmir said:

If interest rates were 6% how affordable would it be then. A far better guide than current low rates. 

If they were 6% I think I'd just have to move to a much cheaper part of the country!

JeffMason

MaryNB said:

If you're comfortable with £400 go with that. On a fixed-term mortgage, a lot of lenders will let you overpay 10% of the balance each year without penalty - that is 10% of the balance on the 1st of January that year. Therefore you're not stuck with paying £400 if you can afford more. If you end up overpaying regularly, you can look at reducing the length of your mortgage when your fixed term comes to an end. This can give you some flexibility regarding your monthly payments. 

I applied for a mortgage that is 27% of my take-home pay. I could go higher but I wasn't comfortable doing so. I'm planning to get a lodger in after the first few months so will use that income to overpay. 

The only issue with that is I can't get a house in the areas I like for that. If I spend more, I can.

Thrugelmir

JeffMason said:

Thrugelmir said:

If interest rates were 6% how affordable would it be then. A far better guide than current low rates. 

If they were 6% I think I'd just have to move to a much cheaper part of the country!

That's why decisions need to be made with thought. Mortgage interest rates are already starting to creep up.  

jackieblack

JeffMason said:

Thrugelmir said:

If interest rates were 6% how affordable would it be then. A far better guide than current low rates. 

If they were 6% I think I'd just have to move to a much cheaper part of the country!

I’m old enough to remember interest rates of over 15%! 😱

JeffMason

Thrugelmir said:

JeffMason said:

Thrugelmir said:

If interest rates were 6% how affordable would it be then. A far better guide than current low rates. 

If they were 6% I think I'd just have to move to a much cheaper part of the country!

That's why decisions need to be made with thought. Mortgage interest rates are already starting to creep up.  

But surely I'm okay as long as I lock into a 5 year fixed rate and remortgage when that comes to an end. If rates have really gone up that much, I will happily move out of the city. The plan was to definitely move again in 10 years, and it might happen sooner anyway. This is will be my first house, first mortgage, and not my "forever" home.

steve866

When I started looking to move in summer 2019, I was looking for a house in one area or a flat in nicer area with a budget of around 22% of post tax income, for mortgage payments. which was an amount I felt comfortable with. 

I realized 2 things over the last year.
1) Moving house is stressful, time consuming and expensive, especially when moving to a 2nd or 3rd home (as opposed to being a FTB).
2) Lockdown made me realize how much money I was wasting (e.g. eating out every day for lunch, coffees, smoothies etc).
I decided to max out my borrowing to avoid having to move again, with mortgage payments now at 35% of post tax income. 
I am very confident I have made the right decision and complete next week

JeffMason

steve866 said:

When I started looking to move in summer 2019, I was looking for a house in one area or a flat in nicer area with a budget of around 22% of post tax income, for mortgage payments. which was an amount I felt comfortable with. 

I realized 2 things over the last year.
1) Moving house is stressful, time consuming and expensive, especially when moving to a 2nd or 3rd home (as opposed to being a FTB).
2) Lockdown made me realize how much money I was wasting (e.g. eating out every day for lunch, coffees, smoothies etc).
I decided to max out my borrowing to avoid having to move again, with mortgage payments now at 35% of post tax income. 
I am very confident I have made the right decision and complete next week

Makes a lot of sense. And you're not worried about the interest rates going up?

HCIMbtw

regarding the worry about interest rates going up... plan for it... a bit. 

Firstly as you have said if you fix for 5 years.. then your payments aren't going to change in this period, they are set in a contract. 

Beyond this as thrugelmir has said if they go up to 6% could you handle it? if your maxed out to the extent it would mean u default on payments an ur home gets repossessed... is that a risk you want to take..  ur probably stretching yourself too much. 

It might not be as easy as selling and moving, house prices might have depreciated (feels unlikely but who can predict the future) and then you might be stuck with the higher payments. 

that said if interest rates go up to 6-15% the UK will be having a whole lot of issues and repossessions to deal with as we have a generation that is now very comfortable and used to low rates. 

I personally just set for 2 years at a time, I like the freedom to move, get the best current rates and take the risk that rates might be higher in a couple of years time and I end up paying more (conversely they could be lower and i pay less). If rates go up to 8% I could pay it (begrudgingly), so I plan for some flex. 

You don't have to. You can do what you want, your money, your risk, your choice. 

JeffMason

HCIMbtw said:

regarding the worry about interest rates going up... plan for it... a bit. 

Firstly as you have said if you fix for 5 years.. then your payments aren't going to change in this period, they are set in a contract. 

Beyond this as thrugelmir has said if they go up to 6% could you handle it? if your maxed out to the extent it would mean u default on payments an ur home gets repossessed... is that a risk you want to take..  ur probably stretching yourself too much. 

It might not be as easy as selling and moving, house prices might have depreciated (feels unlikely but who can predict the future) and then you might be stuck with the higher payments. 

that said if interest rates go up to 6-15% the UK will be having a whole lot of issues and repossessions to deal with as we have a generation that is now very comfortable and used to low rates. 

I personally just set for 2 years at a time, I like the freedom to move, get the best current rates and take the risk that rates might be higher in a couple of years time and I end up paying more (conversely they could be lower and i pay less). If rates go up to 8% I could pay it (begrudgingly), so I plan for some flex. 

You don't have to. You can do what you want, your money, your risk, your choice. 

If interest rates went up to 8% I wouldn't even be able to afford the cheaper mortgage I'd gert right now. Can people really plan for that much of a change and still buy a house? Wow. I could probably get away with it being 6% on my lower end mortgage and 5% on the middle. I'm not going to go near the higher end they'll lend me. But 8% and I'll have to move...

This is of course, based upon my current salary. It should go up as the years pass, even just the basic yearly increments will add up in 5 years time, so that will affect these numbers a little.

FYI - I don't want to take a big risk. At all. I guess I'm just trying to find the balance between to cautious and not cautious enough.

steve866

JeffMason said:

steve866 said:

When I started looking to move in summer 2019, I was looking for a house in one area or a flat in nicer area with a budget of around 22% of post tax income, for mortgage payments. which was an amount I felt comfortable with. 

I realized 2 things over the last year.
1) Moving house is stressful, time consuming and expensive, especially when moving to a 2nd or 3rd home (as opposed to being a FTB).
2) Lockdown made me realize how much money I was wasting (e.g. eating out every day for lunch, coffees, smoothies etc).
I decided to max out my borrowing to avoid having to move again, with mortgage payments now at 35% of post tax income. 
I am very confident I have made the right decision and complete next week

Makes a lot of sense. And you're not worried about the interest rates going up?

I am slightly concerned, although I will he making overpayments where I can. I also think that I would be pretty screwed in general if interest rates suddenly rose to 6k. What difference in property would you get from borrowing more? If it’s the difference between leasehold and freehold I would borrow more.