To ask what your comfort level would be in terms of this financial position and Mortgage?

[Sleepdep2]

Having a slight disagreement with DH over this, we are looking at houses and aren’t yet on the same page re. Outgoings.

Situation:
-2 DC and won’t have any more, total nursery costs £200 a month.
-1 car we own, petrol costs c. £150 a month
-Our personal bills e.g hair appointments, phone contracts, spotify etc amount to £100.
-Budget c.£600 for food per month.
-Pensions are funded from salary deductions/employer contributions so don’t need considering for this exercise. We are both 40.

Joint income of £4400 (salary only, not including the £200 a month child benefit we recieve) the above amounts to £1050 leaving £3,350

My question to you all is what of the remaining £3,350 would you be comfortable spending on your Mortgage/Bills, knowing that some also needs to be earmarked for fun/social and savings/investments?

What about other bills? Electric/gas/water/council tax/home insurance/car insurance etc

Probably about 2k leaving 1.3k as a buffer. I own a small modest house but my mortgage leaves me no wiggle room as it's awful, please don't do this.

£1500 for mortgage? I don’t know why, just gut feeling that about 25% is “right”

£800

Yes you've omitted these major bills from your calculations.
X

3k. Still leaves over £300 to spend. Remember that the mortgage will become relatively more affordable as time goes on and moving is expensive and daunting.

Utility bills all to be included in Mortgage/Bills sum. Insurance we pay annually x

Mortgage + bills = 2000. There are always expensive things that crop up with a house and car, or things like unexpected dentist bill, and of course holidays and savings

I think that’s the wrong way of looking at it. You need to list everything that is a bill first and then have how much is left over for mortgage. Not lump bills and mortgage in together.

4-6 months savings fund is important to protect against job loss etc. Once you have that, its really just a) what property do you need and can realistically pay off a bit early b) make sure you understand your pension forecast and what it is invested in c) spend money on what you value.

Just be really careful with interests. Really build in a big buffer for rises.

I generally work on planning that no more than 1/3 of my take home pay go on mortgage... ideally less in case rates rise etc

Mortgage and bills I would say £1500. You don’t have savings listed yet so I would want a chunk to go to that, and on a take home of £4400 unless you already put in extra to your pensions I’d want to up those contributions. So £1500 to mortgage plus bills, £800 to savings and pensions leaving around £1k for extras, house maintenance and some spending money, maybe a holiday.

Good advice is to go for around 1/3 of your take home pay on mortgage, so around 1400-1500. I'd be very careful about going any higher.

1.5k mortgage maybe 1.7k if i LOVED the house....def no more than that

I wouldn't want more than £2K on mortgage and bills. Although you haven't said whether you would expect to earn more money in the future or whether you are likely as advanced in your careers as you're likely to go /want to go. If you'd expect to earn more i'd maybe go up to £2.5K.

As you mention nursery, I assume your children are young. They get more expensive as they get older.

We earn similar and mortgage is £1200 with council tax and energy bills, insurance etc at about £500 - leaves us with approx £400/month we save for holidays, £200/month we save for DC, £250/month DC activities etc and should be about £300 for fun/social (though feels like lots goes on random stuff around the house that needs mending) after all your costs above but we take a bit more each for gym membership etc. Whether I would be happy to make more cut backs to put more into mortgage payment depends on what the difference in house would be like - I wouldn't pay more where we are now as house and location both work really well for us

I think we are both at our ceilings, so it will only be annual rises. I forgot to say DH usually has an annual bonus which after tax tends to be up to £4000.

DC are 1 and 3.

Don't forget how expensive clothes and shoes get for growing kids, particularly once they start school. Birthday presents for all the class parties. Cost of clubs and activities. Clothes and shoes for both of you.

I agree.

OP's way of looking at this is back to front. She has accounted for haircuts but not essentials like energy costs, council tax etc.

Your calculations seem a bit back to front to me. You currently have a lot of non-negotiable costs which you don't seem to have considered...

If your joint income is 4600 salary inc child benefit

Then you have to deduct 200 nursery (maybe this will fall away when they start school but will you need wraparound care instead?)
Less 150 petrol
Less 600 food
Car related costs - tax, MOT, servicing, insurance?
Other child related costs? School uniform is usually non-negotiable (not including all the clubs/hobbies which are optional)
Other house related costs - boiler, maintenance, house insurance?
Utilities - council tax, electricity, water, gas?

What do you have left after all of that? Then work out what you can afford as a mortgage with a buffer to have a roof over your head and have some degree of enjoyment of your life.

How do you have nursery costs of only £200/month?

They go in a couple of days each per week so with the government hours and top up it works out at that.

You really need to state the total amount of the mortgage being borrowed along with the interest rate and over how many years.

This allows for a better assessment of overall risk.

For example a small mortgage over a few years is a different beast to a large mortgage over 35 years.

I’d say half of whatever you have leftover, so £1675 to cover mortgage and all bills

You need to factor in life insurance costs and consider what would happen if one of you is ill.

So work out what you can afford based on jist the highest of your two salaries, then savings should get to 6 months of total outgoings (divide by 24 to get your monthly savings target, once your buffer is established then the extra is treats/holidays fund).

Remainder would then be your monthly mortgage maximum.