Do you think I could afford this mortgage?

Quixoticity11

Take home salary of £2350 per month
House costs £220K
House needs updating- it’s a victorian terrace not been decorated since 90s, but I could live with it for a while.

I have 30k saved for deposit, moving costs and initial decorating. I thought I’d give 22k deposit and 8k for the rest. I’d be borrowing pretty much the maximum possible at just under 5x my salary.

My mortgage payments on a 5 year fix would be around £740 and I would probably be able to save around £300-400 a month after living costs.

My salary will rise over the next 5 years but not a huge amount. I will have an extra £300 a month in 5 years I think.

I am a single first time buyer and if I buy this house, I most likely will never need to move again.

I swing from thinking this is a sensible investment to thinking it is unaffordable and foolish.

What do you think? 

bouicca21

How does that budget compare with the budget you need for renting?  If you buy would you be living in something better than renting?  Would it be big enough to have the option of a lodger to stretch the budget further?

MaryNB

Have you spoken to a broker? A 5x multiplier is hard to get. Often only possible with a high salary and low LTV.  4.5x is far more realistic.

Have you considered getting a lodger to help pay your mortgage?

[Deleted User]

It looks reasonable from what you have said. These days that's a pretty normal looking mortgage.

Just remember to factor in all the council tax, utilities, building insurance, contents insurance, and save some for replacing the boiler etc. As long as you are good at saving it should be okay.

Getting a property is a much better idea than renting.

Quixoticity11

Thanks for the replies!
I haven’t spoken to a broker get but got an agreement in principle from my bank, they’ll lend me 199,850.

I’m paying a lot less renting at the moment, am in a 1 bed flat now whereas this is a 2 bed house. I could get a lodger if I really needed to, it’s a university town.

I am a bit anxious about interest rate rises, but hoping that a salary increase of 2-300 pcm in 5 years is probably likely to cover at least most of any likely increased payments due to interest going up?

And as I will be paying off the mortgage and will owe less as time goes by, also hoping might get at least comparable fixed rate deal when it comes to remortgaging in 5 years even if rates have gone up?

kingstreet

Complete a budget planner and work out how much you will feel comfortable paying each month while having a decent standard of living. WE can't tell YOU what is affordable nor comfortable...

Quixoticity11

Thanks Kingstreet, I know that it’s affordable for me now, I just don’t know how much of a buffer it’s sensible to have and whether this level of borrowing would be considered risky? 
I’m a novice at all this.

Pixie5740

You’re buying a home not an investment. 

newbuildbudget

Consider any additional outgoings that come with a house that you don’t get from renting. Increased insurance (not a lot for buildings and contents, but there’s large excesses to pay in some cases), whether you want critical care cover (who will pay the mortgage if you get ill and can’t work?), an older property will need work beyond what you can see (no running to the landlord if the boiler breaks etc). 

On paper, our mortgage looks to be around £30pcm cheaper than our rent was, but by the time we set up life insurance, factor in a council tax increase for moving somewhere bigger, and saving a chunk of money every month as a house emergency fund that we didn’t have to factor in as tenants we’re taking about having to ‘find’ an additional £250pcm compared to renting each month (we’re a couple so don’t get council tax reduction and our life insurance is obviously ~double that of a single person). This was obviously factored in before we moved, but is money that’s easy to forget about when you get excited about a house purchase. 

£8k isn’t a lot for renovating parts of a house - my brother was quoted that just to upgrade a bathroom a couple of months ago. And moving isn’t cheap either. Solicitors fees will be at least £1000 so knock that off your renovating budget straight away, and that’s before you consider house costs.

Have you spoken to a broker? They will tell you what you will actually be eligible for rather than speculating on a mortgage that you might not even be able to get on your current wage. 

aoleks

It is affordable, but it’s the bank you have to convince, not us. Little chance of a 5x mortgage on that salary.

lookstraightahead

So lovely to see someone being sensible and taking a moment to reflect.

The mortgage itself sounds affordable to me, interest rates can only go up so worth thinking about - like you are doing.

Although like for like it appears buying is better than renting, remember with an old house you can have a lot of maintenance costs, and repairs. Have you had a L3 survey done on the house?

a lodger as a back up is an excellent idea as well.