to take out a mortgage that is nearly 1/3 of our household income?

[RevoltingPeasant]

I honestly have no idea if this is normal or not. It seems like masses to me! - but is it?

DP and I have a net income of about 3500 a month; we don't have DC yet but hopefully will soon and will then have to factor in nursery costs of about 700. WIBU to go for a mortgage with repayments of about 1k?

I think it is doable, however I think if you can get a decent family home for less and therefore have more disposable income then go with that. You may want more than one child or may get twins!

emsy Thanks - that is v similar to us - DP also travels a comparable distance to work with his diesel eating car and I commute with my own car.

We don't have any other debt and our incomes as listed above are post-pension-payout as those come out at source. So without factoring in pensions you'd have an extra 400 a month - hmmm MIGHT be just do-able?

scarlett yes, the places we are looking at now are quite 'nice' (well, by our standards!) - i.e., 3-4 bed semis and detacheds with gardens for potential DC, in a decent area. Might have to revise expectations downwards...

marriedinwhite well yes, sadly I wasn't old enough in 1982 to buy a house before mortgages went sky-high . We only live in a small terrace that we bought 5 years ago, just before the market crashed. £200k isn't a lot for a small house in the SE, even now.

We're lucky we got somewhere though, and that we can afford it. Our mortgage is much lower than rent on a similar property would be, so it's fine.

Interest rates are low at present. Suggest you consider what you'd do when they go up (which everyone thinks they will). In 1990 my mortgage interest rate was 15.3%........horrific

Didn't mean to scare you BTW, that was extreme, about as high as it got, but just pointing out they will go up (at least by a bit, not up to 15.3 hopefully) and it's wise to do the maths before you commit yourself

redwine can you not get fixed rate mortgages though?

Not scary, helpful!!

You can get fixed rate, but usually for only 3-5 years. After that you're at the mercy of the market. If rates have increased then you will not be able to get a such a good fixed rate next time.

In our case it worked massively in our favour as interest rates had plumeted and our mortgage dropped by £500 a month! We're not getting another fixed rate for the time being.

Ah, thanks Jareth.

I guess if you add £400 that we spend on pensions to our approx £200 that we spend on childcare (DH buys childcare vouchers that pretty much cover the cost, so the net cost to us of the lost pay is about £180 to £200 a month, depending on what hours she goes and whether we need to top up that month to cover it) then you've got £600, so you're £100 short - and DH has a horse on part loan that costs £100 a month so we're even!

Yes, it's do-able but it's tight. I also write a blog that generates some income (about £200 a month) that I fritter on gifts, makeup, haircuts etc and we have savings so if anything disastrous happened (roof blew off, car fell to bits etc) we would be okay. We don't spend savings as a rule though - when our boiler broke last month I sold some stuff on ebay which paid for that. DH is very frugal! We do buy a couple of bottles of cheap wine most weeks though, and I have lunch out with DD in a cafe once a week and take her to soft play once a week (total about £30 on 'fun stuff', which I suppose to some people is quite a lot really). I haven't bought clothes for a looooooooong time tho.

It isn't the percentage or proportion of your net income that counts, it's the actual cash amount.

20% of a big take-home income is a lot more left to live on than 20% of a small wage.

You should spend no more than a third of your income on your housing. That's the rule of thumb.

Our mortgage was £880 and DH's wage £2.5k take home, we managed fine (even paying £275/month for 15hours/wk nursery til DS hit 3), you do have less outgoings when you have your first baby, initially at least.

Hoping interest rates will stay low til 2013 and we get onto another decent rate fixed as otherwise we'll have to raise our tenants' rent, which just about covers mortgage and service charge atm

When you apply, the mortgage company will decide if they think you can afford it. They are much stricter now than they were a few years ago. We have a bigger joint income than you but were only offered £120,000 by one lender, so they will look at all your outgoings and your credit ratings. It might be worth checking there's nothing negative showing up on your credit report.

Yeah should be fine.we paid 625 on an income of 1500 when we first got our current place and it was doable with a car etc. I dont even think your situation would be a struggle tbh.

Also akiss has wrote above she could only get 120k on a bigger income than yours, whereas me and dh got nearly that on minimum wage incomes with me only doing part time hours in 2006.

Beat me to it Blu
1/3 of 9k income pm still leaves 6K to play with.
1/3 of £900 income pm leaves only £600.

molly- I don't know how you did that.

We went to the estate agents and they tried us with all companies with the mortgage broker. We went for self cert and just lied stretched the truth a little.

YANBU as such, no, but you'd be very unwise to make such a significant financial decision without doing loads and loads of research and number crunching. there are various issues to consider.

Regarding mortgages, yes you can fix but usually for no more than 5 years. I wouldn't consider taking one out without knowing lots more than you do atm. Interest rates are very low at the moment and have been for some time. Opinion is divided as to how long this can continue, but what we do know is that over the last century or so the average has been 8-9%. Ideally don't take out any mortgage you couldn't afford if rates went to eg 10%, just in case. If they never go that high in 25 years, or whatever the term is, great. You don't mention your deposit, but if it's relatively low eg less than 20%, you need to be prepared for the possibility of negative equity. If that happens, when your fixed term expires you won't get a good rate.

1k a month is not that much if you live in the south east. If you're in, say, Manchester, it's a lot more than you need to pay for a nice family home, so you'd need to be able to justify the extra risk. Still, it would be a good idea to look at affordability if one of you did lose your job. Would one income be enough to afford the repayments? The traditional adage is that housing costs should be no more than one third of income, so you're within that.

Regarding childcare, how many DC do you anticipate having? What are average childcare costs locally, and do your employers offer childcare vouchers? This will give you an idea how much you'll spend. You could also look at your likely maternity pay, if you intend to take ML. If you have a 1k mortgage and 2 DC in full time nursery, this is going to take up the majority of your income, if only for a short time. You might have no more than 1k a month left over- will this be enough, what are your other outgoings?

A mortgage is a gamble and there's no getting round that- you could do all the research you like and still end up getting bitten. However, nobody should make such a big decision without having done as much research as possible!

The percentage is irrelevant. What is far more important is the amount you have left after paying the mortgage and whether it covers your outgoings and savings ambitions.

tis par for the course

repayment?

Everyone has been saying interest rates will rise since 2006. Nobody has a scooby but it strikes me if they did thousands would be on the streets within months and the councils couldn't cope.

Rule of thumb, prior to mortgages being given out on crazy terms, was borrowing upto 3 x annual salaray for a single person or 2.5 x combined salary for a couple.