How much (not the actual amount) are you paying for a mortgage?

[FrettyBetty]

My husband and I are buying a house in anticipation of our first child. It's all really new to us, including having a big mortgage! We just had a MIL visit, who was shocked at how much we are prepared to spend on a house. Which got us thinking...

Now, yes, we are thinking of a whopping great mortgage. But, living in London, there is not really a way around this. We are also blessed to be earning decent amounts. Before MIL I did not think that we are overburdening ourselves because I thought that proportionally to our incomes it's all right. The mortgage would be almost all of my salary, while my husband earns double of what I earn. In my mind, giving one full salary is not excessive, especially when that one salary is a significantly smaller one.

So I am curious, what do you pay on a mortgage proportionally to your incomes? One full salary? Half of one? More than one? It would be really interesting to hear different experiences!

Having a large mortgage to take home pay makes me very twitchy because I lived through the 15% mortgage rates!

We're doing about the same as you - mortgage is just over my 3-day-a-week takehome income, MrNC earns nearly twice as much as me (but takehome is only 25% more). But I'm in a pretty secure job though the nature of the work could change, and have the right to increase my hours if necessary. We also have a bit of rental income (1/3 my takehome) and have space for a lodger if necessary (and know people who might take us up on that for a while).

We've been investing in the house a lot so even with market going down, our next mortgage should be only around 30% of house value, which I hope will be doable no matter what happens to the rates...

It's just about do-able (but no foreign holidays for a good few years). I went part time after our 3rd DC. Things will get better once DC2 hits 3 and gets 15 hours of free childcare - then I could possibly up my hours a bit.
It has been tough though. Luckily our years of our family being very young (i.e the dilemma of full time work and loads of childcare or parttime earnings but less outlay) have coincided with the low interest rates (thank the Lord for tracker mortgage).

Oh - and have had to shop v carefully at Lidl etc and so have not kept up with the Joneses etc....
I have a ten pound mobile phone etc. (That's the price of the handset)

Looking at mine and DH's salary combined (after taX) we pay less than 10%. Probably about 7% of our salary goes on mortgage.

20% of DH's take home salary. I'm a lazy, free loading mare.

Not an option in our home, Chicken .

But I am starting to think that my proportional calculating does not work. Can you see I am not an accountant?

Can you draw up a list of outgoings & incomings now, and projected outgoings & incomings for new home with gorgeous new baby? - taking into account additional Council Tax & Utilities (can get idea from EPC information - get full details from the EA). Factor in proposed mortgage payments and allow for a buffer for interest rate rises, plus allow for some savings each month so you have spare funds to fall back on should life events take a bit of a detour.

Work out your own comfortable mortgage position. If it ties in with your current thoughts & plans, then you should be able to move forward confidently.
Don't forget to negotiate yourselves a good price for the house you want to buy.

Very exciting. Good luck!

Thanks lovelymonster! We have done something like that, and we do feel comfortable. Now we have to learn the art of negotiating a good price...

Well, don't be too polite!!

We calculated the amount to borrow based on DH income alone as I have been laid off twice in the past 4 years. I have found employment again but my income has dropped. We also wanted to cover ourselves incase I can't go back to work due to a sick child/PND/DH being relocated. If I didn't work the mortgage including property taxes would be around 30% of DH income.

Art of neigotiating a good price is rather simple... offer what the house is worth to you. We bought in the US in an area where we are told the sale price is within 5% of the ask. We paid 20% less than the ask. Just always be ready to walk away. We walked away from 3 houses due to the owners not liking the homeowners report we had done.

Cheers girls. I think walking away may not be difficult given that we have not seen anything we absolutely love so far.

What's a homeowner's report?

Earnings of something close to 35k, mortgage £600 pm.

8% of total household income.

It used to be far, far more, about 50%. That was a nightmare.

I have got great payrises, and we have paid off a chunk o f it. We livea in a pretty basic house, and could certainly upgrade to something a lot better, but I much prefer having a small mortgage, and I would much rather stay somewhere smaller than have to worry about huge mortgage payments again.

But I say that as someone who is LUCKY to have ridden the market like I have. If I was starting out I would say go for it, and work your bollocks off to get better jobs to reduce the proportion.

Wow at some of these figures, our mortgage is £950 and we pay out £1500 in school fees so I count them as a 2nd mortgage and we earn a heck of a lot less than some of the figures quoted on here.

ours is probably 50% ish
self employed and bought at the top of the market

I think that small mortgages are a thing of the past. My parents die in horror when I tell them what we and other friends/colleagues in my age group pay. We have take-home pay of £3000/mth. Mortgage is £650/mth. However, the mortgage is purely in my name (DP has bad credit), so actually the repayments are equivalent to a third of my take home pay.

Sounds like we have a lot of cash but we were both pretty hasty with credit cards and personal loans in our early days of adult-hood, and are now battling to pay them off (to the tune of £700/mth between us)

Should both be debt free (except mortgage) by January 2012 so planning on putting that spare cash aside for DC #1 (well, that's MY plan anyway...)

FrettyBetty It is the report you get done why you buy a home in the US. It is similiar to a survey but if they miss something that comes up later you can recover the cost of fixing the problem through insurance carried by the person who completes the survey.

When you consider the amount you are spending on a house a survey is worth every penny. Don't feel bad about walking away either. We found our bids were accepted because we did out homework. Here in the US they keep a record online of house prices. We were able to look up to see what the purchase history of the home was and made sure our bids were at least higher than what they paid for the house. I think there is a website in the UK which offers the same service. I am sure a google would bring it up.

Git - I am usually the proponent of your philosophy and not afraid of working hard - quite the opposite! However, I am a bit worried about mother's guilt (that I am yet to experience). Already planning to go back full time after 6 months...

Job I think you are right about small mortgages being the thing of the past. Though I am worried about how high interest rates could go... We do have a buffer, but there is a limit...

I really do not know what to think. We are planning to borrow way less than they'd lend us (by about 200,000 - 250,000), and have quite high incomes. But then the monthly amount definitely makes my MIL's heart stop.

Thanks for the tips, Want.

Proportionate doesn't work. If one earns £1m (£480k after tax) for example they might be able to live on say £50k a year so spending £430k on the mortgage might be fine. If someone earns £20k a year they probably can't spend anything like the proportion someone earning more can spend on a mortgage. My mortgage is over £1m .

You just need to bear in mind interest rates can rise but also that usually incomes do particularly if you're in a professional job and that as children get older you spend less on childcare too.

I've always been an optimist and over 25 years it's not done us badly borrowing as much as we can but then we knew incomes would rise and childcare costs would fall so it's usually worked out fine. Different people have different views on risk. I have always felt I could get out there and earn more money if I needed to and still feel that in my late 40s.

I'd wait for the price to earnings ratio to revert to its historic mean. Remember, the house price rebound of 2009-2010 (which is over now, by the way) was largely politically engineered. The next financial crisis (seen the news from Ireland, Portugal, Spain, US?) will hit mid-parliament and we'll just have to take the hit.

No problem renting with children - I've got two, and could never afford to buy the house we're in now. Give it a few years and inflation proof your deposit.

40%
we are overpaying like mad though

75% of my take home pay. It didn't start out like that but my circumstances changed. Please bear in mind that life doesn't always go how you'd like it to!