Mortgage payment affordability

DaveS23

Hi,
I am trying to work out what would be affordable for me regarding mortgage payments and if I am being realistic compared to what percentage of take home salary other FTB pay for their mortgage payments. When calculating percentages do I include my pension contribution (NHS) as part of my take home pay ? I will probably purchase a leasehold flat so do I include service charges / ground rent in my figure for the mortgage payment or it this just like a utility expense ? I imagine when I see the average percentage people pay for their mortgage payment out of their take home then if this is a house there would be no service charge but they would be budgeting for repairs to the house outside of the mortgage payment (which would be the equivalent of service charge?). 

Thanks

[Deleted User]

You wouldn't include your pension contributions, as that money is not available for you to spend.  

You need to compare your take home pay with your outgoings to see what is comfortable.

theartfullodger

Also depends on mortgage interest rate (AFAIK they don't stay at fixed rate for ever).

In November 1979 under Thatcher's yoke I had a for then large mortgage.  Started when Bank of England base rate was 10% -ish.  Hit 17% in November 1979.

I was lucky: building society only wanted 15%

housebuyer143

DaveS23 said:

Hi,
I am trying to work out what would be affordable for me regarding mortgage payments and if I am being realistic compared to what percentage of take home salary other FTB pay for their mortgage payments. When calculating percentages do I include my pension contribution (NHS) as part of my take home pay ? I will probably purchase a leasehold flat so do I include service charges / ground rent in my figure for the mortgage payment or it this just like a utility expense ? I imagine when I see the average percentage people pay for their mortgage payment out of their take home then if this is a house there would be no service charge but they would be budgeting for repairs to the house outside of the mortgage payment (which would be the equivalent of service charge?). 

Thanks

Have you done any mortgage calculator affordability checks with a lender online? They will tell you what you can afford. 

They will ask about service charges separate to general living costs, so it's best to factor that in as a separate guaranteed cost. 
Pension, if you plan to keep paying it then I would deducted that from your take home pay, but a mortgage company might not included that payment in affordability. 

What are you trying to work this out for? What is the context? 

If it's just for general living as a percentage of income, you should factor in all house costs such as mortgage, service charge as the basic cost of owning and make sure you can afford it.  

I like to think 1/5th of your salary on housing costs is good, but I imagine for most it's 1/4 or higher.

DaveS23

housebuyer143 said:

DaveS23 said:

Hi,
I am trying to work out what would be affordable for me regarding mortgage payments and if I am being realistic compared to what percentage of take home salary other FTB pay for their mortgage payments. When calculating percentages do I include my pension contribution (NHS) as part of my take home pay ? I will probably purchase a leasehold flat so do I include service charges / ground rent in my figure for the mortgage payment or it this just like a utility expense ? I imagine when I see the average percentage people pay for their mortgage payment out of their take home then if this is a house there would be no service charge but they would be budgeting for repairs to the house outside of the mortgage payment (which would be the equivalent of service charge?). 

Thanks

Have you done any mortgage calculator affordability checks with a lender online? They will tell you what you can afford. 

They will ask about service charges separate to general living costs, so it's best to factor that in as a separate guaranteed cost. 
Pension, if you plan to keep paying it then I would deducted that from your take home pay, but a mortgage company might not included that payment in affordability. 

What are you trying to work this out for? What is the context? 

If it's just for general living as a percentage of income, you should factor in all house costs such as mortgage, service charge as the basic cost of owning and make sure you can afford it.  

I like to think 1/5th of your salary on housing costs is good, but I imagine for most it's 1/4 or higher.

So I am looking to put offer in of 209K for a 2 bed leasehold flat (on market for 220k) . Quoted mortgage payment of £957 by Habito brokers. Service charge £1500 pa / GR £250 pa , so £146 pm . My take home salary is £2500 but I pay £161 for a fleet car which is a pretax salary deduction , so make that £2661. I have no other debts , will be living by myself , no dependants. So the housing costs (mortgage + service charges) work out about 41% of take home. I have done my budget including other potential costs (boiler care, insurances etc) and have about £200 over per month to save for hols / enjoy other luxuries,  if I am sensible. 

Also to mention I can sometimes do private work to top up my income , but this is not consistent (about £1000 pa after tax).

DaveS23

housebuyer143 said:

DaveS23 said:

Hi,
I am trying to work out what would be affordable for me regarding mortgage payments and if I am being realistic compared to what percentage of take home salary other FTB pay for their mortgage payments. When calculating percentages do I include my pension contribution (NHS) as part of my take home pay ? I will probably purchase a leasehold flat so do I include service charges / ground rent in my figure for the mortgage payment or it this just like a utility expense ? I imagine when I see the average percentage people pay for their mortgage payment out of their take home then if this is a house there would be no service charge but they would be budgeting for repairs to the house outside of the mortgage payment (which would be the equivalent of service charge?). 

Thanks

Have you done any mortgage calculator affordability checks with a lender online? They will tell you what you can afford. 

They will ask about service charges separate to general living costs, so it's best to factor that in as a separate guaranteed cost. 
Pension, if you plan to keep paying it then I would deducted that from your take home pay, but a mortgage company might not included that payment in affordability. 

What are you trying to work this out for? What is the context? 

If it's just for general living as a percentage of income, you should factor in all house costs such as mortgage, service charge as the basic cost of owning and make sure you can afford it.  

I like to think 1/5th of your salary on housing costs is good, but I imagine for most it's 1/4 or higher.

I think I have used a calculator , is this what you mean ? https://www.santander.co.uk/personal/mortgages/mortgage-calculators/how-much-could-i-borrow

TheJP

DaveS23 said:

housebuyer143 said:

DaveS23 said:

Hi,
I am trying to work out what would be affordable for me regarding mortgage payments and if I am being realistic compared to what percentage of take home salary other FTB pay for their mortgage payments. When calculating percentages do I include my pension contribution (NHS) as part of my take home pay ? I will probably purchase a leasehold flat so do I include service charges / ground rent in my figure for the mortgage payment or it this just like a utility expense ? I imagine when I see the average percentage people pay for their mortgage payment out of their take home then if this is a house there would be no service charge but they would be budgeting for repairs to the house outside of the mortgage payment (which would be the equivalent of service charge?). 

Thanks

Have you done any mortgage calculator affordability checks with a lender online? They will tell you what you can afford. 

They will ask about service charges separate to general living costs, so it's best to factor that in as a separate guaranteed cost. 
Pension, if you plan to keep paying it then I would deducted that from your take home pay, but a mortgage company might not included that payment in affordability. 

What are you trying to work this out for? What is the context? 

If it's just for general living as a percentage of income, you should factor in all house costs such as mortgage, service charge as the basic cost of owning and make sure you can afford it.  

I like to think 1/5th of your salary on housing costs is good, but I imagine for most it's 1/4 or higher.

I think I have used a calculator , is this what you mean ? https://www.santander.co.uk/personal/mortgages/mortgage-calculators/how-much-could-i-borrow

That's just an indication and not a true reflection of what the lender will lend based on more detailed information at application stage. They will ask how much deductions including pension you make at application stage.

Richiem1987

You have to ask yourself and calcuculae if intrest rates went up to say 11%, could you afford it. It looks as though base rate could hit 4% this year and by end of 2023 could be 6-7%. Rates likely to stay there or even rise to 10%+ for a short period before coming back down a bit at the tail end of 2024, depending if this recession brings down inflation. I would advise a 5 year fix if you can afford it. 

Standingstrong

You wouldn't include your pension contributions, as that money is not available for you to spend.  

That’s for your future for when your in retired years 

You need to calculate what your yearly salary is. And monthly salary from your work. 

Any savings? Any help from mum and dad with deposit? 

How much deposit do you have also as you can put that in the MSE mortgage calculator. 

DaveS23

Standingstrong said:

You wouldn't include your pension contributions, as that money is not available for you to spend.  

That’s for your future for when your in retired years 

You need to calculate what your yearly salary is. And monthly salary from your work. 

Any savings? Any help from mum and dad with deposit? 

How much deposit do you have also as you can put that in the MSE mortgage calculator. 

I have emergency fund savings and also savings for surveying , conveyancing and moving in costs. My 5% deposit is in place in a Help to Buy ISA plus a little extra over.

DaveS23

I have just chatted to Habito and they advised that I would be eligible for a 5 year fix from Santander at £966 per month factoring in my salary deductions including pension. However I now have a new problem, I work for the NHS and we have recently had a pay rise confirmed , and this going to be back dated to 1st April 2022. I have based my calculations on my new salary , however my local trust have been very slow to apply the new salary ( they say this should happen  by September pay date the 24th) , so my payslip does not currently reflect this new salary. Habito have advised that Santander would need to see the actual figure on the payslip , I suggested getting a letter from my payroll dept to confirm my new salary but they seemed to think this would not be enough and actually needs to appear on my payslip. Does this sound right ?