Mortgage 30% of wage?

GT60

Hi I had just listened to a radio programe and it said something about in the old days the bank used to just lend you upto 30% of your salary.
EG £21000 per year so you could borrow what ever £7000 a year in repayments would get you.
The reason for this is we are thinking of an exetension which would push are mortgage upto £625 a month about and i would like o make double sure we can afford it.
I have done a budjet which says yes but in the old days the bank made sure that if something happened you still could afford the repayments hence the 30% rule and i would like to use this rule.
Please could some one help.
in 2 1/2 years fixed deal ends.
hope all this makes sense to some one.
Thank you Niall

maninthestreet

You havent told us what your salary is, the total amount of borrowing, nor the interest rate that applies both now and after the end of your fixed deal.

kunekune

This is still the standard method of doing it in New Zealand. It is 30% of before tax. Personally, we always found 30% a bit rough and ready: it is probably more than someone should be spending if they have a low salary because more of it goes on essentials. And at the upper end, you can probably put a higher percentage in of what you earn over, say, £50K.

But not sure how we can help, given the lack of information ...

UK007BullDog

We need to know:

Income before tax
Your age(s)

Property value

Mortgage amount now and how much more do you want to borrow.

What are your monthly outgoings you have to pay? What is left over at the end of the month?

Any credit cards, loans or hire purchase (amount still outstanding, how many more months/years and the monthly payment).

Then we can help you.

GT60

I think you may have misunder stood me or i wasnt very clear more the later
I heard on radio 4 on you & yours a caller said about how people lend 110% of the house value and in the old days you only got upto 30% of the your salary or something??
The mort is a 5 year fixed took out in 05 with NR.
My Mort is at 59K secured and paying £425 per month including the £60.. and there is £30K left thati can lend some thing NR did in 05. all i do is phone up for it as it has my name on it and i just pay the interest on it.
I have all ready borrowed £14k and paying £60 per month interest on it.
ages me 44 her 42
4 children
Wage is 23500 ish as per p45 .take home is approx £330 pweek
Tax credits £400 pmonth other 500 per month
prop value 190K
Have about £230 left at the end of the month so it says on paper ( when i did a budjet)
C card owe £5800 paying £200 per month no interest all ways transfer
Loan 2 1/2 years left lent £3K at £134 per mpnth
I hope all this is use full for you
Thank you very much Niall
Sorry it is all over the place
please see below for what i was trying to say
Thank you again

GT60

affordability calculation
cost of buying the home should not be more than 35% of your monthly income to leave lots of room to take account of market rate changes etc.
I have just listened to it again, this is what i am trying to work out for the extension should cost 25K
Please say you under stand pretty please
Thanks again Niall

kunekune

Well, I don't see why it is so confusing. You have a computer and under 'accessories' for your operating system there will be a calculator. Work out what 30% of your annual income is, divide it by 12 (or whatever) and that's the most that you should sensibly be paying a month. Then work out what the current mortgage plus the additional loan will cost you and see whether it's more or less than the 30%.

Or is there something I'm not getting?

mitchaa

You get £900pm in tax credits aswell as a £23500 salary?

Something not right there surely?

GT60

I just wanted to know if the 35% rule would be a Very safe way of deciding on if we could afford the extension for when intrest rates go up and our fixed rate ends.
The £900 per month is Not all tax credits part of which is for child disability,
child benefit and DLA.
We also have 4 children.
But any way would the 35% rule be good to follow?
A very big thank you to all of you for your help

kunekune

Niall, we are saying: of course it would. Why wouldn't it?
I was about to say I suspected that part of that figure is DLA. Even with two children and one on DLA, we get £360 a month, and that's not means tested. So if there are means tested things in there, it would be a lot more. I hope no-one was suggesting you were sponging!

GT60

Kunekune i dont no why i explained myself But felt i had to over michaa's remark.