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Is 150k a large mortgage?

(80 Posts)
julesjam Thu 11-Apr-13 15:07:19

...for a 4/5 bed house in Scotland, garden, garage, 2 recep etc. worth around 250k

Payments would be around 600/month. We're lucky to have a small mortgage atm because we bought about 8 years ago, so have a lot of equity in the current property, but increasing to 150k would more or less double our payments.

Is this reasonable? I'm trying to convince DH that it's doable but I think he's a bit shock. Am I, in fact, deluding myself??

julesjam Thu 11-Apr-13 18:16:53

Specialsubject unless I've misunderstood you think we're both not in secure jobs? Not the case - I'm employed pt by a large company, dh is an instrumental teacher, employed by the local council. I'm not naive enough to believe we will never become redundant or become ill, just correcting the impression I may have given that we're not in fairly stable forms of employment.

Rosesforrosie Thu 11-Apr-13 18:29:03

I think special is saying that jobs that seem secure- even traditional ones, do not always remain so.

Although if you get too hung up on that, you'd never get a mortgage of any size.

mateinthree Thu 11-Apr-13 19:49:12

Just because many others are up to their eyeballs in debt, doesn't make it sensible for you to follow suit.

What if base rates go up?
What if you lose your jobs and can't get anything on the same wage?
What if house prices crash?

£150k is 6 times the average gross wage.

We took a mortgage out at less than 1.5x our household income and plan to get the debt paid off ASAP.

You may be alright, but you're also taking a risk. Just bear that it mind.

We have moved a few times now and always managed to do pretty well out of property.

The only common thought about 18 months after each move was that we both agree that we should have pushed a bit harder, taken a bit more of a risk and probably cut out two moves overall! Even this time, when we added a lot to the mortgage and the house is pretty much all we ever dreamed of in a property, for us anyway!

Agree, consider being able to afford the mortgage if interest rates increase.

Also consider how much equity is in the property. Our mortgage is large (affordable for us though and we are paying over a shorter term than the norm plus paying a few hundred extra quid a month) but, even based on a low valuation, there's well over 250k equity in there. So, if things went tits up, we effectively have a house in the property iykwim? Which informed our decision to move again 18 months ago.

myron Thu 11-Apr-13 20:34:26

I think that the £150K mortgage is approximately 3x their income and imo, a monthly payment that is 20% of net income is affordable. (Speaking as someone who pays 25% of net income on the monthly mortgage). I remember paying £600 pcm rent for a 2 bed flat in Camberley back in 1997!

julesjam Fri 12-Apr-13 00:01:03

Needastrongone I think that's what we're trying to do - make the next step up the ladder the biggest one. If it's this difficult to persuade DH to move I don't want to have to do it again in just a few years' time! wink Plus if we can manage to get a place big enough - or with enough potential to expand - then we won't need to. That's one thing we do agree on.

I'm certainly conscious of the risks of increasing the mortgage - it's scary. But I agree also with those saying that if you dwell too much on what could go wrong you'll never move on at all - you might never even leave the house, no matter how big it is!

Metalgoddess Fri 12-Apr-13 08:56:13

I think it sounds perfectly doable based on the fact that it is 1/5 of your take home pay, that's really quite low.

I don't agree with the other posters talking about whether your jobs are secure or what if your income goes down. If this was the case then every couple would buy houses well under their financial capability " just in case" or not be able to buy at all based on one income. You can't worry about everything or no one would ever buy a house at all irrelevant of income. So long as you have a buffer zone in your monthly income, some savings in case of emergency and appropriate insurance, I would say go for it!

SirChenjin Fri 12-Apr-13 09:03:40

Another over-payer here for a similar size of mortgage and property to the OPs in Scotland. We fixed ours a few years ago to get a good deal and then interest rates fell dramatically, so we pay out about £900 a month - urgh. Still, I suppose over-paying is a good thing (keep telling myself that, I may start to believe it)

I agree with the others who say that it very much depends on your income - it sounds as if you can afford it easily - but do think about a fixed, repayment mortgage rather than interest-only.

Spero Fri 12-Apr-13 09:08:53

I have never, ever been able to get a mortgage that took up less than 1/3rd of my disposable income. Any mortgage that takes only 1/5 of your disposable income sounds bloody brilliant to me.

Metalgoddess Fri 12-Apr-13 09:10:37

I think it sounds perfectly doable based on the fact that it is 1/5 of your take home pay, that's really quite low.

I don't agree with the other posters talking about whether your jobs are secure or what if your income goes down. If this was the case then every couple would buy houses well under their financial capability " just in case" or not be able to buy at all based on one income. You can't worry about everything or no one would ever buy a house at all irrelevant of income. So long as you have a buffer zone in your monthly income, some savings in case of emergency and appropriate insurance, I would say go for it!

Trills Fri 12-Apr-13 09:13:35

YABU

No, wait that didn't make any sense, did it? Maybe because the question "is this a large mortgage?" is not a question of reasonableness.

YABU to ask "is this a large mortgage?" It depends on your income and the value of the house.

The rule of thumb of 1/3 of your earnings is silly too - what's important is how much you have left over after you pay the mortgage, bills, council tax insurance and other necessities. If you earn £1,500 a month and pay £500 in mortgage, or if you earn £4,500 a month and pay £1,500 on your mortgage, you are both paying 1/3 of your earnings but in one situation you ave £1,000 left and in the other you have £3,000 left.

LifeofPo Fri 12-Apr-13 09:17:49

Message withdrawn at poster's request.

Spero Fri 12-Apr-13 09:23:27

I don't think the 1/3 rule is silly at all. It is a useful guide to how affordable your mortgage is. I would be wary of going over that, however massive my income.

cece Fri 12-Apr-13 09:38:29

The monthly amount of £600 seems a bargain to me. Ours is double that.

But as others are saying

can you afford it from monthly income
how old are you and how many years is the mortgage for
consider rises in interest rates

specialsubject Fri 12-Apr-13 10:11:45

obviously I'm not saying 'don't get a mortgage unless you have a secure job' - no-one would do it then.

I am saying 'have savings to keep the roof over your head for a few months if/when someone loses a job or income reduces'.

if you get through life without at least one redundancy I'm impressed, because no-one I know has.

SirChenjin Fri 12-Apr-13 10:26:10

I think the 1/3rd thing is perfectly sensible. If you have £1000 left after a mortgage but have a small family with few outgoings then you could easily be better off than the large family with £3K left over but with massive outgoings

woozlebear Fri 12-Apr-13 11:04:02

The rule of thumb of 1/3 of your earnings is silly too - what's important is how much you have left over after you pay the mortgage, bills, council tax insurance and other necessities

I think the idea is that it's a generally effective rule of thumb assuming average outgoings / other living costs, especially at the lower / average end of income scale. Obviously the more you earn the less relevant it is, because your remaining 2/3 will be larger. But there's plenty of bits of generally relevant advice that don't apply to the rich. You don't need a pension if you've got a super yacht to auction off!

Alibabaandthe40nappies Fri 12-Apr-13 11:17:40

I would be horrified if our mortgage was a third of income when interest rates are so low. Really horrified.

OP - work out how much the repayments would be at 8% interest, and then see how that stacks up against your monthly income.

Our payment is currently 15% of income, we could cope with it getting to 35% of income before we had to start reassessing.

SirChenjin Fri 12-Apr-13 11:53:40

Or fix the interest rate rather than worrying about what ifs....

KatoPotato Fri 12-Apr-13 11:57:42

Theres a great budget calculator on the Martin Lewis site, its an excel download and DH and I used it before we met with our Mortgage Advisor.

FasterStronger Fri 12-Apr-13 12:26:23

I used to work in an area related to interest rate trading. Fixing interest rates will generally work out more expensive but will keep your payments down if interest rates go up during the life of your arrangement. Its like buying insurance. It is a cost but can save the day if disaster strikes. If you have lots of financial slack, I would not fix but I would overpay, to reduce the debt while rates are low.

So either consider fixing or consider overpaying. Doing neither is the worst option.

Spero Fri 12-Apr-13 12:45:10

Low interest rates only apply to those with big deposits. As I have never managed to scrape together more than 10% I am stuck with the higher rates. So my mortgage has never gone below 1/3 of my income.

FanjoForTheMammaries Fri 12-Apr-13 12:51:37

Our mortgage is about 1/5-1/6 of our income and feels perfectly manageable just now.

FanjoForTheMammaries Fri 12-Apr-13 12:52:37

It used to be nearer 1/3 and felt big

Alibabaandthe40nappies Fri 12-Apr-13 13:06:13

Sir - not easy to fix the rate for the whole term of the mortgage though is it?

And I know that you would owe less after 5 years and therefore in theory have a bigger deposit on a new mortgage so get a better rate and a lower payment, but what about if prices fall?

Unless you have a pretty clear idea that your income is going to increase in the future, then it isn't sensible to put yourself in a position of only just being able to afford your mortgage.

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