Only 4 times salary for mortgage?

pinkshoes

MoneyInstigator wrote: »

The thing is I know I can afford a 170k mortgage. The monthly repayments on capital + interest is something I can afford which also leaves me plenty of money for the usual expenses such as travel, food and entertainment etc.

The mortage repayments would come to approx £1100 over a 25 year period and I would have approx £900+ left over per month which I think is more than enough for all other costs.

Is it me or is 4 times salary mortgage a bit to less?

And if interest rates go up to 10% (they have before!), that'll be £1560 a month... then £100 for council tax, £60 for bills (gas, elec, water), £200 for food/groceries etc... That comes to over £1900 already not including other expenses like having a life and running a car!

I would be more concerned that on a £35k salary you have only saved up an £8k deposit, which implies you like spending money, and would have to make a lifestyle change to afford a house.

Try saving up at least a 10% deposit.

People used to wait until they got married to buy a house, but now people seem to think it's their right to be able to afford a house on their own. Why not wait until you have a partner,and you BOTH have £35k salaries, so could easily afford a small house!?

I'm not convinced houses will drop in price much, and more or a stagnation in popular areas, so don't presume they will drop.

wisbech_lad

MoneyInstigator wrote: »

Is it me or is 4 times salary mortgage a bit to less?

It is you. And Mr Picky would like to point out that it is "a bit too low" or "a bit too small" not a "bit to less"

At the moment I am thinking of getting a 4-5x salary mortgage. But with a 40% downpayment...

[Deleted User]

Very simply, the housing market has been skewed towards dual income households since the 80s. It's not a very new thing.

Either look towards the lower end of the market, find someone to buy the house with or buy a 2 bed place with the aim to rent one of the rooms.

Think about it as a competition.. you on 35k are competing with me and my OH with a joint income of >60k... who's going to be the ones pushing up the house prices?

My advice would be find a nice partner who can bring another salary to the mortgage

teabelly

Houses aren't too expensive, it's salary inflation that hasn't kept up! The real inflation level is around 5-6% for most people but the govt use a much lower fiddled figure so salary increases are only average 3 or 4%. If wages had risen by 5% pa for the last couple of years most houses would be more affordable.

Different lenders use different criteria so some may allow you to buy a 170k house with your salary. Start looking at what you are spending your money on to see whether it is all necessary. If you want to make money from property and get on the ladder start with something cheaper. One or two bedroomed flats should be a lot less than 170k. Buy one which needs work and then move up later once the market has stabilised in your area. Interest rates are on the way down but mortgage rates may not necessarily follow unless you have a pristine credit record.

trulysaintly

teabelly wrote: »

Houses aren't too expensive, it's salary inflation that hasn't kept up! The real inflation level is around 5-6% for most people but the govt use a much lower fiddled figure so salary increases are only average 3 or 4%. If wages had risen by 5% pa for the last couple of years most houses would be more affordable.

Different lenders use different criteria so some may allow you to buy a 170k house with your salary. Start looking at what you are spending your money on to see whether it is all necessary. If you want to make money from property and get on the ladder start with something cheaper. One or two bedroomed flats should be a lot less than 170k. Buy one which needs work and then move up later once the market has stabilised in your area. Interest rates are on the way down but mortgage rates may not necessarily follow unless you have a pristine credit record.

Spot on.

If Wages inflation had run at the same level as property values we would still be in the region of 3x income when you are looking for a mortgage.

Unfortunately employers try every trick in the book to make you think they're doing you a favour if you get ANY pay rise.

A few years back I worked for Lloyds TSB. They convinced people that getting a 2% performance related payrise was better than the previous arrangement where you got an automatic 'cost of living' increase..circa 3%.

Surprise Surprise they create as many loopholes as possible to ensure you don't get the performance related 2%.....

Glad I left!

Lenders will lend to you, but be wary when buying jointly. It's great to get a big mortgage when you move in with a girlfriend (lets say you're earning £30k each) but what happens when children arrive and your income halves???

Think of everything before you start!

PasturesNew

teabelly wrote: »

Houses aren't too expensive, it's salary inflation that hasn't kept up!

People will borrow what they are offered. If their pay is more they will borrow more. If wages had been more people would have borrowed more so house prices would have been higher.

What has changed are things like the salary multiple allowed, looking at affordability and not a multiple ... any way that the banks can find to get as many new borrowing customers as possible.

If I am a bank and bring out a deal offering 10x salary, first 2 years fixed at 2% then rising on a sliding scale over the next 40 years to cover the initial shortfall I'd have a queue of people up the road. People won't sit and work that one out and realise they can't afford it/it's not a good deal for them... they'd snap it up!

[Deleted User]

truely, you hit my situation spot on.

Bought a house last year for 200k, on combined salaries of about 50k with a 180k mortgage. Joint salaries are now 60k (wage inflation? ha, i got a 14% payrise this year). Mortgage is about 700 quid interest only but planning on repayments now we can afford them this year, will be about 1050.

HOWEVER! We're getting married in June, probably will end up having kids in 2009 and even though i expect my salary to be about 5-8% more by then we've got to work out how to go from 65k income to 35k..

Sorry just ranting about my worst fears, but you get the idea

warrend

ringo_24601 wrote: »

Very simply, the housing market has been skewed towards dual income households since the 80s. It's not a very new thing.

Either look towards the lower end of the market, find someone to buy the house with or buy a 2 bed place with the aim to rent one of the rooms.

Think about it as a competition.. you on 35k are competing with me and my OH with a joint income of >60k... who's going to be the ones pushing up the house prices?

My advice would be find a nice partner who can bring another salary to the mortgage

Or buy a property where you can rent 1/2 rooms out - make sure you can afford to live basically on what you have committed to - then the rest is "play" money.

trulysaintly

ringo_24601 wrote: »

truely, you hit my situation spot on.

Bought a house last year for 200k, on combined salaries of about 50k with a 180k mortgage. Joint salaries are now 60k (wage inflation? ha, i got a 14% payrise this year). Mortgage is about 700 quid interest only but planning on repayments now we can afford them this year, will be about 1050.

HOWEVER! We're getting married in June, probably will end up having kids in 2009 and even though i expect my salary to be about 5-8% more by then we've got to work out how to go from 65k income to 35k..

Sorry just ranting about my worst fears, but you get the idea

No probs Ringo,

I speak from experience - before our first child was born we had a joint income of £35k, which at that time got us a £180k mortgage (based on affordability)....

then, when my wife left work (as it worked out better and cheaper than childcare to stay at home) we lost £15k overnight.

We survived - but only by reducing our outgoings significantly - out went the Gym membership (£85 per month) and Sky (£40 per month) - took up running instead and ran the London Marathon!!!!

Cut down on Food expenditure too...easily done if you take your time and avoid the Tesco Express etc on the way home from work!

[Deleted User]

hehe, yeh, i know, we'll get by. She's NHS so i'll only have to worry about a drop in income 6 months after she gives birth.. i've worked out i'll hopefully be a big career jump on from then (only get 10 - 15% payrises at work when you move up a level) and i'm 18 months away from the next.

Hopefully we'll drop back to just under what we are at now.. so no more Wii games for me for a bit

Damn these london house prices