what is a sensible mortgage amount to borrow?

[alittleteapot]

When I bought my flat, over ten years ago, my mortgage was £70k and then cost me about £450 a month which felt comfortable (interest rates were much higher then.) I inherited some money and was able to pay it off but now we need to upsize and houses are SO much more expensive than flats (ie in proportion to the actual extra space your'e buying...) At the moment we could easily afford a very big mortgage of more than £300k (they seem to dish out much more these days - used to be three times salary didn't it?) - but of course if and when interest rates rise we could be totally scuppered if we did that. So, what do you think is a sensible amount in ratio to earnings and what's the best way to plan for the future? it's so tempting to go for a big mortgage while interest rates are low, so I suppose I'm inviting you to caution me otherwise!

We have never bothered more than 2.75 times our joint salaries as this is our comfort zone. DH often complains that all our friends have bigger houses blah blah blah, but I know that if he was made redundant (very real possibility) my income (own business) would be able to cover all our costs.

I'd agree with the traditional 'three times salary' benchmark for the total amount. I also think that mortgage payments shouldn't add up to more than 50% of your take-home. Final safety-net... buy a smaller house in a cracking but expensive location, rather than a massive house in a cheaper but not-so-nice location. That way it's more likely to hold its value and be more easily saleable even if the market nose-dives.

Thanks. The other option we have is to try and keep flat as buy to let. Again at the moment very attractive because of low interest rates but perhaps not a long term safe option. weird after credit crunch that they are lending a lot more. maybe cos we have option of big deposit. but we have unsafe jobs and not great health. buy to let attractive as extra income but could go belly up if everything crashes i suppose.

We have borrowed 4x DH's salary but have not taken my (small, part time) salary into account. This way if things go a bit wrong I can up my hours (easily) to boost our income. We are in this house for the long hall so considered it worth it.

Nothing's truly 'safe'. Everything comes with a risk attached and all you can do is reduce the risk intelligently. For most of us that means savings, insurance and assets. If your buy-to-let idea means you could afford a reasonable-sized house and seriously bump up your savings at the same time then it would be a good one and you'd still have the asset (flat) to sell if things got sticky. If health is an issue, taking out life insurance or critical illness insurance to cover the mortgage balance would also make sense.

Surely you should also consider how many years you have until retirement. While it may be OK to borrow a large salary multiple when you are young, I don't think I would feel the same if I was in my late 40s or into my 50s.

Speak to a mortgage adviser and ask them how much payments would change if rates increased (eg by 2%) how much would your payments change? Just be cautious re buy to let as the rates for these mortgages are very high still, so you don't want to find you are struggling with mortgage repayments on this if you can't rent it out.

If you do decide to keep the BTL consider going to a ccompany that guarantee your monthly payment. I use a company that charge the tenant £675 and give me £520 BUT they fully manage the property and it is their responsibility to evict the tenant if they need to. I get the guarantee of a monthly amount which covers my mortgage so I don't need to worry.

I agree that mortgage companies dole out far too much monry, far too easily, which is probably why the housing market is overblown and inequitous at the moment.

We borrowed about 2.8 times DH's salary and did not take mine into account as I already own a house, which I rent out (more hassle than it's worth IMO, it's being sold when we can afford to do so). Our repayments are about 20 % of our joint income (minus my mortage repayments, we save money from my rental)- which is prefectly comfortable. I wouldn't want to pay any more.

We don't live in a Georgian Rectory- but nor do money worries keep us awake at night, which is more important in my view.

Someone picked up on insurance. I think it is important that you speak to someone (preferably independant and whole of market) that can advise you on current policies (Life and otherwise) that you should have in place if you do not already.

I know that people have different circumstances, and thus different needs, but sometimes it is worth going to discuss your circumstances with professionals because they may see a hole where you cannot.

Good Luck house hunting (I love it).

Me xx

helzapoppin - do you have a mortgage on the house you rent out? ( we may have a similar circumstance and can't decide how much we should take that mortgage into account given that rent takes care of it...)

Thanks everyone for your replies