Average maximums

marco_79

Taking wages and mortgages into account what is the average in pecentage form that households pay as a mortgage/rent from there net monthly incomes. I have a few friends at 40% and two at over 50% I thought this was way over the top when you take into account council tax etc.

Any thoughts

Marco

Bestthingsinlifearefree

HI Marco,

I remember people used to say your mortgage / rent should not be more than 30% of your take home pay.

e.g if your take home pay is £1000, your mortgage / rent should be about £300 to keep you in a comfort zone.

Though if some one took home £2000 and pay 50% in mortgage / rent they will still have £1000 left.

Which arguably puts them in a better position than some one who takes home £1000 and only pays 30% on rent / mortgage as they only have £700 left even though they have a lower income percentage re pay to mortgage / rent etc etc

Generally the no more than 30% of take home spent on mortgage / rent as rule of thumb is not a bad guide to keep you in a safety zone.

meanmachine_2

marco_79 wrote:

Taking wages and mortgages into account what is the average in pecentage form that households pay as a mortgage/rent from there net monthly incomes. I have a few friends at 40% and two at over 50% I thought this was way over the top when you take into account council tax etc.

Any thoughts

Marco

Well I know someone whose mortgage payments are 50% of their take home, and it's an INTEREST ONLY mortgage!!!!!!!!

They bought last year, buying into the EA bull about how they'd forever miss the boat otherwise.

After 15 months of falls in the area (n London), they're feeling rather sick.

I'd say 40% of take home on one income, or 30% of combined income on a repayment is in the comfort zone - privided you're on a long fixed rate.

davepugh1981

We are at 40% but we have halved our term in order to pay off the mortgage by the time I'm 35, partner 33.

Different people will feel comfortable at different levels of gearing. We do not have expensive taste in clothes, jewelry, going out etc. As the OP stated if you are earning high salary lets say £10k per month, then 5k to spend on clothes, cars, etc is a hell of a lot of money and so they could realsitically feel comforatable at 60%.

marco_79

Its good to here your views.

We have just moved into our new home on a 3 year fixed at 33% of our combined income going to the mortgage, well this is when my wife drops from full time to part time when our first child comes along. 20% deposit 150k mortgage. Didn't buy to make money bought a good family home that we don't intend to move from. Although prices not falling in Scotland at the moment.

meanmachine_2

Marco, your figures seem sensible.

I shouldn't worry.

IvanOpinion

When we first got married (1985) the mortgage rate was around about 15%. At the time my take home pay was about £475 per month and the mortgage (interest only) was £230 plus an addtional £30-ish for endowments (which is about 55%). I was also attempting to pay back a £1000 debt I had built up at university. Needless to say when out first phone bill came in for about £120 I was, to say the very least, a little bit dismayed (DW tells the story differently).

It was very hard going and at the end of each month it was pretty much a check on how much overdrawn we were. I would not advise anybody to try this ... but irrespective you always seem to find some way of coping.

Ivan

lush_walrus

My mortgage would work out approximately 15% of my income, which is mainly due to having a large deposit when I moved to this house. Month to month I pay about another 30% of my income towards paying the mortgage off early.

But Im not sure %s are much of an indicator of affordability to be honest as really there are pretty set outgoings outside of your mortgage such as electricity, gas, council tax, phone bills etc which are generally not proportional to levels of income.

Basically what I am trying to say is that 30% of £1000 would leave £700 for all other expenses. Where as 30% of £3000 would leave £2100 for monthly expenses.

Propotionally, its unlikely that monthly expenses for a single person living in a small house would be that different in accordance with their earning power.

So I would say if you really want to truely know what you can afford forget percentages and work out if you get a mortgage for x amount, my repayments will be y which will leave z to pay for everything else in a month. Also, I would always advice people to prepare for the worst and make sure that money is available to be prepared for an interest hike at the end of a flat rate period or if the mortgage is variable make sure that you check what an extra couple of percent on your mortgage will mean in monthly repayments.

If you do that, then long term you cant go wrong!