To ask about your mortgages?(69 Posts)
We are interested in a house but have worked out that if we go to close to their asking price, we will have a mortgage of about 260k over 25 years, but we may up it to 30.
Is it affordable? Probably just about. Does it scare the shit out of me? Yes.
So does anybody mind me asking about the level of your mortgage?
Bit of background - East Anglia, semi-rural area and relatively expensive. It will not be buying us a mansion but a family home.
Now that I have written that figure I am bricking it even more. Be kind to me please.
Whether it is affordable depends on your income(s), surely?
we bought our 3 bed family home (very good location with garden etc) 7 years ago and have a £450k mortgage on it, so £300k is nowt. Mind you am in the Channel Islands, so a bit more pricey round here.
You do have to bear in mind that interest rates are very low at the moment and its unrealistic to think that these rates will be there forever. You should ask the mortgage lender to calculate what the monthly payments would be at a rate of 5% and 10% just to see if you could manage it.
aye our repayments are £2000 pcm, and affordable to us
If your salaries cover it with enough left to cover all other living costs and some extra then it is affordable. If you are at risk of not being able to meet the payments then it is not. It is a lot of money and these are financially unsettling times. Have you thought about not going too near their asking price first? You never know. We knocked over £30k off the asking price of our house recently.
Get the keys to our first house on Friday. Mortgage is 'only' 80k and that still scares me
Thanks Beachy I actually worked it out on the basis of 4 per cent over 25 years. I agree mortgage rates are low just now and will def change at some point.
Thanks Funnys for your input.
Definitely depends on your income. We bought a house seven years ago that cost us 130k. Our monthly payments are £300 which are easily affordable for us. We could have bought a bigger house but didn't want the bigger mortgage.
Where I live you can still get a four bed semi for 150k. However I know people near me who push themselves to the brink to buy a massive, five bed detached home for 280k. Then they have no quality of life as all their income is going on the mortgage. Personally I'd rather have the smaller house, less worry and more disposable income.
I totally agree with beachyhead - our mortgage rate is fixed for 5 years but after that, things could all go tits up with interest rates through the roof. So think about how much you could POTENTIALLY pay back, rather than just what you can pay back now.
The numbers are huge, daunting, etc. But think about what you spend in rent, or indeed in mortgage on a house that isn't right. Weigh it up, I suppose.
Could you afford your repayments if your mortgage rate went up by 5%? By 10% That is the way to look at things.
£260k isn't such a big number in mortgage terms.
pink wine I will negotiate just looking at the worst case scenario. This is the second time these people have put the house on the Market and funnily enough some friends viewed last time around and put an offer in 30k under which was refused, but having said that they had not sold and were not in a good position.
But to err on the side of caution I am wondering if they will play hardball.
Do as Beachy suggests and work it out at 10% too. I had colleagues with mortgages way back on Black Monday when rates went stratospheric and remember their horror. Some got caught in negative equity... we thought then people would learn but it seems not.
I reckon house prices haven't bottomed yet - they are still too expensive - you might do better to wait.
(easy for me to say. I'm ancient and we repaid mortgage years ago)
If you both work could you afford your repayments if one of you lost your job? Or you had more kids and went on mat leave? That's what we looked at when deciding how much to borrow.
Will this be your first time buying a house?
Beachyhead is spot on - see what the mortgage would be like at 10% interest.
Dont forget about council tax, buildings insurance, water bills etc. I dont live in England, but maybe theres a website you can get a guide price of the tax etc you would pay?
You should have an emergency fund of at least 6 months income, just in case.
Sorry if that put a dampner on it, but a smaller house with less financial stress will likely be a happier home than a bigger house you struggle to afford.
I think the good old fashioned 3X salary is a sensible multiplier in these uncertain times. As somebody else said, calculate the repayments on an interest rate of 5% (which I believe is an average rate you'd expect over a 25 year time frame) and 10% (which has happened in the past!) and work out if you could afford them.
I've also read on financial websites that housing costs shouldn't take up more than a third of your income (but I'd assume 'housing' would include council tax and service charges).
Basically, you need to do a detailed and accurate budget and work out if you could afford it, and what would happen if one of you lost your job (as sadly happens a lot these days.)
I agree with VivaLeBeaver don't forget to take those factors into account. Also plan strategies for long term illness, unexpected repairs etc.
I had an unexpected illness leaving me unable to work for nearly 4 months and I very nearly lost everything as a result. The stress was indescribable and definitely impeded my recovery. Sounds a bit doom and gloom but do plan for every contingency.
It is a lot of money. Ours is half that and is still a lot of money. If either you or other half lost your job, how would you meet the repayments? Especially if rates went up? My plan is to cram in foreign language students - we live on the S Coast (and work in the public sector so may well have to put plan into action soon!) If that doesn't worry you and you're not planning any Mat Leave or other changes then I would say go for it if it's what you want. Do you have savings and/or will be able to start savings just in case things don't run to plan. Before I had kids I would have been more gung-ho but our house is the only home they've known and I would hate to have to uproot them because we had overextended ourselves.
We have our kids and will be better off financially when we stop paying the nursery in a few years time.
Luckily we both have jobs which are thankfully recession proof. I work part-time three days a week but could go full-time if needed. Though that would increase the nursery bill of course.
DP gets fancy pants benefits in his job if he is sick. I don't, but have a level of insurance cover for accident and sickness.
However as things currently stand with me on a part-time salary we couldn't afford a mortgage at 10 per cent, no way. But I think it highly unlikely this would occur in the short-term. As the country is on its knees financially at the moment anyhow, I whoever is in power will fight to keep the rates down to prevent exacerbating the problem.
And it's interesting about some saying housing costs shouldn't take up more than a third of your salary. Is this realistic with house prices as they are?
In my parents generation most houses were purchased on one salary. This isn't the norm now at all.
When we brought our house it was 1989 our mortgage was for £42,500 it seemed astronomical to us, and we spent 10 years in negative equity. Our monthly repayments on our mortgage almost doubled in a year, base rate was 9% in 1989 and had jumped to 14% in 1990. Look into a fixed rate too. (although my work mate told me, her mortgage advisor said they were not recomended at the moment)
alibabaa maybe that's the way to go about it fix for 5 years by which time DC are out of nursery and I may go back to work for 4 days.
(I can't remember what they call it now, but then it was RASP) We have always had Bill insurance as well as a mortgage repayment insurance for BOTH of us. So if either of us were made redundant, was off sick or had an accident we could pay our mortgage and household bills. DP and I used them both twice in the early 90's
Thanks naught had no idea about bills insurance.
The house we like is heated with oil hee hee need to factor that increase as well.
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