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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??

Rosesforrosie Thu 11-Apr-13 15:09:10

Doesn't sound large to me. Our payments are larger than that and our mortgage technically 'smaller'.

But depends what you earn (take home) each month really doesn't it?

titchy Thu 11-Apr-13 15:13:33

Well it's all relative isn't it! What is large for you is tiny for someone else!

If it is more than 3.5 your joint salaries then some lenders would regard this as large.

julesjam Thu 11-Apr-13 15:16:43

It's approx 1/5 of take-home pay - that's about average isn't it?

But then, I suppose it's a bit over 3.5 times joint salaries. But I think our mortgage lender will lend us it, from previous discussions with them.

nipersvest Thu 11-Apr-13 15:19:00

where are you getting a 150k mortgage with payments of 600 a month from?

our mortgage is around the 150k mark, but our payments are more like 1k a month! am now worried we're overpaying sad

Doyouthinktheysaurus Thu 11-Apr-13 15:19:29

It'll be huge to some and small for others but it's all related to your income, nothing more.

Can you afford the repayments comfortably and will that still be the case if interest rates rise which they will at some stage?

Are your dh's concerns justified?

Naoko Thu 11-Apr-13 15:19:57

I'm paying not far short of £600 in rent for a two bed mid terrace in the arse end of nowhere, and that's quite a lot more than a 5th of our income. I'm now considering moving to Scotland.

Winterwardrobetime Thu 11-Apr-13 15:20:25

Message withdrawn at poster's request.

orangeandlemons Thu 11-Apr-13 15:20:25

Yeah mines 130k and our payments are785 per month

DiscoDonkey Thu 11-Apr-13 15:22:14

Nipersvest, that does sound like a large monthly payment. Do you have a high interest rate? We don't pay that much and our mortgage is over £200000.

nemno Thu 11-Apr-13 15:22:39

I think that is large based on multiple of salary. With interest rates so low I don't think you should be basing it on current monthly payments. Consider that it is very likely that over the lifetime of a mortgage the interest rates will be much higher at some times.

GoatsHaveStrangeEyes Thu 11-Apr-13 15:23:57

Our mortgage is £140k and it feels huge to me but to others it can seem tiny. Our payments are £575 a month.

wonkylegs Thu 11-Apr-13 15:24:47

As everybody says you can't generalise on these things it's all about your ability to pay not the actual amounts involved.

badguider Thu 11-Apr-13 15:25:34

It's only 60% of the property value so as long as its not an inflated price or new-build it shouldn't go into negative equity.
Have you worked out what the repayments would be if interest went back to 6% (as it was around 2005)?

patchesmcp Thu 11-Apr-13 15:29:35

You can't necessarily compare what you pay against what someone else does as you also need to factor in the term the mortgage is over, not just the amount borrowed and interest rate.

OP I agree with the people who say it depends entirely on what you can afford. How much money will you have left at the end of each month to cover food, gas, electricity, water, council tax etc - all the essentials and will you be able to cover unforseen bills etc? How would an interest rate increase impact on you? Answer those questions and you'll know if you can afford it.

TheDoctrineOfSnatch Thu 11-Apr-13 15:31:11

One fifth of income sounds less than average.

EuroShaggleton Thu 11-Apr-13 15:33:53

It's all relative (to income and ppty value). Our current mortgage is about 280k but we are thinking about moving and doubling it. We live in London and want a bit more room.

It's definitely worth considering the impact of increased mortgage rates - there is only one way they can go from where they are now.

woozlebear Thu 11-Apr-13 15:34:33

I thought a third of income was the tradional average and in the SE now it's more like half for a lot of people.

FasterStronger Thu 11-Apr-13 15:36:06

badguider's advice is spot on. plan for interest rates returning to normal levels.

it is not about whether anyone else thinks it is large or small, affordable or not.

if you look though your bank statements, can you afford it? how about putting together a spreadsheet and looking at your spending over the last year?

Doyouthinktheysaurus Thu 11-Apr-13 15:36:55

Our mortgage is £90k and we overpay £200 a month roughly so repayments are £650 a month which is slightly more than 1/6 of our income.

We are comfortable and able to save each month, but that's it! I wouldn't want a bigger mortgage than that tbh.

It's very individual though. Only you and your DH know what your priorities are and what your outgoings are.

julesjam Thu 11-Apr-13 15:37:54

Thanks for the input folks. I know, it's a bit more complex than just the basic figures etc. and I'm also looking closely at the monthly budget to assess whether it really is truly affordable. I suppose I'm just after a sense of perspective in general terms.

If you had all looked horrified and said 'that's WAY too much - don't do it!' then I wouldn't have wasted any more breath on it! Or 'WOWSERS that sounds like a good deal' then I'd be picking up the phone, no matter what DH says... As it is, sounds like it's just one of those things we'll need to figure out based on our own sums.

Khaleese Thu 11-Apr-13 15:42:52

Nipersvest, now is the best time to overpay!!

It's all relative to your salary, job security, outgoings and your age.

Rework it on 8% and you will have an idea of how you would survive if it all goes bad. (Although interest rates have been 14%! Plus.)

myron Thu 11-Apr-13 15:58:23

£600 monthly payment is a bargain! Assuming you have no other loans or liabilities outside of the mortgage which is only 20% of net income - I would say it's definitely affordable. I would guess that you wouldn't be able to rent a similar house for that amount. Our mortgage is more but our monthly payments are over twice that amount due to a shorter term. It's all relative to income, job security, etc.... My friend has a £375k mortgage but has a similar monthly payment to me but hers is over a 30 yr term so 20 yrs more than mine!

julesjam Thu 11-Apr-13 16:48:05

I believe we can afford it, although of course at first we will probably notice an extra couple of hundred leaving the account each month. And I don't think we'd be pushing ourselves to the max - and if there were any difficulties there's potential for slightly more income (I work freelance as well as p/t and could up my f/l work) and flexibility on mortgage payments with the lender with the term etc

DH is being cautious - and rightly so, it's a lot of money. But I'm the one that handles all the bills and budgeting in our house, all he does is earn it and spend it! so I feel like I need a bit of external advice.

specialsubject Thu 11-Apr-13 17:30:07

what happens if the income stops - no-one has a secure job, anyone can get ill. Is it a fixed rate - there's only one way rates can go, although base rate is now forecast to stay low for another two years.

just things to add to the equation.

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.

julesjam Fri 12-Apr-13 16:39:06

Thanks for an abundance of advice and different perspectives here folks.

So now I know I'm not considering anything wildly high or low, but I do need to consider our budget and possible increases in payments.

The main thing now tbh is trying to convince DH of the wisdom of a move now. I'm no expert but I get the sense that if the market's about to pick up soon, then now may be the time to upgrade while prices are on the low side and there's still room to negotiate downwards if need be?

I reckon our current place is pretty sellable at any point, whereas things move more slowly for the bigger properties we've been considering. But maybe that won't be the case in a year or so?

Trills Fri 12-Apr-13 16:49:09

£600 a month, and 1/5 of your take-home pay, and having a mortgage worth for only 3/5 of the value of the property, all sounds very reasonable indeed to me.

SirChenjin Fri 12-Apr-13 16:53:58

No, not for the whole term of your mortgage, Ali, but you can fix it for a decent length of time - it definitely pays to shop around. Anyway, it sounds as if the OP has a good handle on things.

LadyKooKoo Fri 12-Apr-13 16:57:23

We have just moved and gone from a £70k mortgage to £170k. It was daunting but so worth it. Mortgage is 75% LTV and repayments are approximately one fifth of our monthly income. We are on a 2 year fixed rate at the moment and are overpaying by pretty much double. Based on what you have said, I would say move and do it now. The property market is likely to improve over the next two years (I work in property management and everyone says it) so get the house you want while you can afford it.

julesjam Fri 12-Apr-13 17:25:07

Ladykookoo you're playing my tune!

FWIW I'm looking to port the current 50k mortgage we have as it's on a tiny interest rate, close to base rate, which we managed to fluke just before everything when bananas. So if we carry that over, and extend the term back to 25 yrs a third of our mortgage will be v small payments, the other two thirds will of course be a new mortgage with a 'normal' rate. But that's how I'm figuring we can keep the payments comfortably low - I would definitely considering overpaying, or reducing the term in the future, as circumstances allow.

DD2 is starting nursery, will be at school in 2 years so I'm intending/hoping my income may increase again then as I have more time to dedicate to freelance work or switch to a full time post if possible.

Spero Fri 12-Apr-13 18:04:23

Serious question - why does it matter if prices rise or fall? Presumably your house will also rise or fall along with all the others? So your position doesn't change.

I thought this would only be of relevance to anyone who wasn't already on the property ladder.

I don't think anyone should seriously think they can play the housing market. All these 'experts' predicting things - didn't see them predicting the crash. Move if you want a nice home, not because you think you are cannily assessing the market. I think that could be dangerous.

FasterStronger Fri 12-Apr-13 18:24:38

Because it changes the amount of equity you have. And for many this means getting into negative equity. I agree that rising house prices are only good for downsizers but it does not follow that falling prices are ok. Really we want near stability.

Spero Fri 12-Apr-13 18:41:08

Yes, I can see the problem if it puts you in negative equity. But if it doesn't, if your house falls or rises, so too does the house you want to buy.

If house prices dont fall I can't see how my daughters generation will ever own a home.

Alibabaandthe40nappies Fri 12-Apr-13 18:54:21

Inflation Spero. It is coming at some point, it has to. All this debt, there is no way that the country can earn enough to pay it off.
With inflation wages will rise, and so prices will come back more into line with earnings.

Alibabaandthe40nappies Fri 12-Apr-13 19:00:40

But I absolutely agree that people should be moving to buy a home for themselves, not in a speculative way.

And LadyKooKoo with respect, everyone says it because they are desperately trying to talk another bubble into existence. The current house-buyer generation have had their fingers burnt now though, so many people who have stared into the abyss even if they have managed to stay out of it. That memory is going to take a good few years to be replaced. No-one is going to be looking to borrow a 6/7 x multiplier of their salary again soon.

Peetle Fri 12-Apr-13 20:24:01

We have a £150K mortgage which costs us just under £700 a month. It was almost £1K when we moved as rates have come down so much. Like an awful lot of people we'd struggle if they got back to that level, but that doesn't mean it won't happen.

Queazy Fri 12-Apr-13 20:33:55

Our mortgage is 1/3 of our salaries and massive but we're in London at the moment. It makes me nervous in case something happens to our jobs or I can't go back to work after mat leave, but as the other posters say, I guess you'd never get one if you worried too much.

£600 between two people with two stable incomes sounds very reasonable. Sorry if repeating anyone - but speaking to a (free) financial adviser really helped us. I needed a money makeover

Xx

Prawntoast Fri 12-Apr-13 20:35:03

General inflation does not mean wage inflation is guaranteed. Inflation is and has been outstripping wage inflation for several years now. Wages are being kept down by outsourcing and globalisation. Also unlike the 70's the unions in this country are relatively weak, there are aren't strikes week after week demanding pay rises that outstrip inflation.

marriedinwhiteagain Fri 12-Apr-13 20:43:36

Are property prices increasing where you are?
Are the repayments affordable when all other costs accounted for?
Can you take a risk vis a vis job security?

It's the risk of other factors that needs to be taken into account rather than the level of the mortgage I think. What happens if it goes tits up and is there still a benefit if it does?

Khaleese Fri 12-Apr-13 20:48:22

Peetle why would you struggle? Have your circumstances changed?

We did a big move a few years back, our 5.5 fell to 2.5 but we kept our payments at 5.5 and overpayed.

Its the chepest it will ever be so overpay if you can.

LadyKooKoo Fri 12-Apr-13 22:15:43

My parents bought their first house in 1978 for £3k (people thought they were insane) and sold it for £14k in 1980. House prices shoot up and then drop, it is the way things work, it will happen again. Problem is that wages don't increase that way.

Monty27 Fri 12-Apr-13 22:20:01

600 should be affordable if you're well paid.

Nursery fees etc are that around here so budget carefully.

hth

mateinthree Sun 14-Apr-13 12:22:30

Yes LadyKooKoo, however last time they shot up, the government pulled out all the stops to prop up house prices so they haven't really dropped back to where they ought to be.

It is amazing that there are still people out there thinking house prices are now 'low' and we are due a boom. The economy is in the gutter and will be for many years, who is going to to be driving up the prices of millions of houses?

Spero Sun 14-Apr-13 16:56:44

I am in the top 10% of earners and had a 10% deposit. Just about managed to squeeze myself into a 2 bed terrace with a ridiculous mortgage. Interested to know just how house prices are going to 'shoot up' again.

Who the hell will be buying?

LadyKooKoo Sun 14-Apr-13 18:30:15

I don't think house prices are 'low', the market has levelled off. An increase is an increase whether it's half of a percent or 10% and prices are going up.

Spero Sun 14-Apr-13 18:43:59

You said they will shoot up! If they 'shoot up' I assumed that was by more than a few thousand pounds.

IrnBruTheNoo Sun 14-Apr-13 18:53:52

We have a small mortgage through choice (less than £150k) for a 4 (all double!) bed house, two receptions rooms, large garden, etc. I personally would not want to go above £100k if I could help it for that size of house.

TracyK Sun 05-May-13 19:47:46

Don't forget to factor in the increase of council tax, heating and insurance when you move up. Plus legal and moving costs. We have £140k mortgage in Scotland, but I'm overpaying in the hope to get t under £100k

leaderscorp Wed 08-May-13 07:30:12

It depends on the interest rate. However, 150K is not that large.

gazzalw Wed 08-May-13 07:53:40

It depends where you live. In London and the Home Counties it's pretty small I would say....

Lavenderandlimes Thu 16-May-13 12:54:03

You need to work out if you can afford it if
*you go to one salary (illness job loss)
*that you can afford the repayments when the interest rates return to normal in 5 years....

peteypiranha Sat 08-Jun-13 00:21:34

150k is a small mortgage imo

MadeOfStarDust Sat 08-Jun-13 17:04:08

Is that an interest only mortgage? - how would you pay back capital? - can you even get an interest only mortgage of that size ?

olivo Sat 08-Jun-13 19:22:55

Not to us, ours is £350 k. But it depends how many years you have put it over, and how much you bring home.

olivo Sat 08-Jun-13 19:23:44

Oh, also, they way we see it is the proportion it is, versus the proportion of the house that actually belongs to you.

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