Mortgage limit

[musicalmoney]

I'll start by saying I know this is very subjective, but I'd appreciate input all the same.

My current take home monthly pay is £1860. I have one 16yo and I'm a single parent, receiving £100 child maintenance and £84 child benefit.

I have no commuting costs and nothing on credit at present. May need to look at replacing my car in the next year or so, and that will have to be financed.

On my income, what would you be comfortable paying out on your monthly mortgage payment?

I know the bank would offer me something like £130 - 135k mortgage, and I have no intention of taking the maximum, or including my CB/CB in my figures as I know this could stop any time. My current mortgage is very small, so having a "proper" mortgage payment seems daunting .

Just curious really as my friend mentioned how much she pays today and it was way more than I would have expected and we're on the exact same salary. Only difference is she has two kids.

Thanks.

I should say, my friend bought a bigger house than I need, and has taken her mortgage over 7 years less than I intend to, due to age.

I'm just wondering if I'm being too cautious about what I was planning to pay out each month, and therefore denying is the chance of a "better" home.

I wouldn't want to pay more than £350 a month in your situation, being able to save a bit every month too would be a bonus as opposed to a bigger mortgage

Really? Okay, that's far less than what I was thinking! Now I am worried.

My current mortgage is £225. I was estimating at doubling it as I've been putting a good few hundred away for months now (including prior to Covid) but without scrimping.

It's hard to say, but paying out about a third of your income in mortgage is reasonable, so around £5-600 pounds.

What other people are comfortable with doesn't really help you, because everyone has different expectations about lifestyle that need to be considered on a low to average income.

If you're the type of person who always wants to buy their lunch at work, have the latest mobile phone, a newish car on finance, clothes, haircuts and beauty treatments, buying things for the house, days out, meals out, takeaways, regular holidays etc, that's a big chunk of money that you need to have available in addition to your mortgage and bills to cover that.

You say that you've been able to save a good few hundred a month without feeling like you're scrimping, so that probably means that you're not spending a lot on stuff and experiences, so you could probably afford a bigger mortgage, but you should also think about whether you want to.

Would you like a bigger house, or one in a more expensive area? If you do, there's nothing wrong with taking on a larger mortgage to finance it, but obviously you need to consider the commitment as you're making it that you need to work longer when you might decide you want to retire or go part time or make other life changes when your DC leaves home, which could be quite soon, or not for 5 or 10 years or more.

You also need to consider what would happen if you can't work, especially when you no longer have a dependant child, because benefits for a single person in a mortgaged home with no dependents are very small and wouldn't cover much of a mortgage as well as a car payment and general living costs.

Just make sure you can overpay. Maybe something at the middle of your comfortable budget but you can always overpay to clear down faster.

I think 5-600 ish would be fine
For me it's about factoring in council tax (varies hugely) and commute (You have none) as well but honestly it's all cheaper than rent.

I have always aimed to have a spare room to rent "in an emergency"
(To datw there has been no emergency)

I was always told mortgage should be no more than a third of household take home pay.

Personally I'm not comfortable going that high, ours is currently 10% of our take home pay as we were lucky to get a small mortgage and have pay rises since, 20-25% is my comfort level as it means still having some spare for saving for emergencies and enjoying.

The given rule of thumb is to pay a third of your salary on mortgage costs.

A third as a rule of thumb is not something to get hung up on because a £600 mortgage on an £1800 income would have a different impact on finances to a £2000 mortgage on a £6000 income. Plus different household sizes and non mortgage costs to consider.

£350-400 max for me with those figures. We have two incomes and bring home around £3100pm and £400 nursery fees and our mortgage is £550,and that's just right we can still save snd do everything we enjoy. We have no debts or finance except the mortgage.

A third sounds so much to me when council tax and utility bills are so high . I would consider if your dc is going to go to university too even on a full loan there are deposits and other costs to consider

@musicalmoney

Really? Okay, that's far less than what I was thinking! Now I am worried.

My current mortgage is £225. I was estimating at doubling it as I've been putting a good few hundred away for months now (including prior to Covid) but without scrimping.

Well there you go - if you are putting a few hundred away plus the £225 mortgage without scrimping - then that is a far better assessment than anyone else can give. I would probably go up to whatever mortgage means that I can still put £100 a month away. And don’t forget - if things do go wrong - you can cut back a bit.

One small thing to be aware of - over the last few months we have been living in “Covid world” which basically means we can’t spend money on holidays, meals out or anything else fun. Will you still feel like you are still not scrimping if those things are available again?

Thank you for these replies. All much appreciated.

I certainly wouldn't be spending a third of my salary on my mortgage. The thought terrifies me! I think 25% is more realistic.

I'm not quite at the top of my salary scale, so that will increase slightly next year, as well as my student loan being paid off in a couple of years, but again I don't want to factor that in too much.

We've lived in a tiny, rubbish flat all of DC's life, so having a nice home is definitely my priority, but I'm also enjoying being able to treat him (and myself) more as my salary has increased/outgoings decreased, but I by no means have an expensive lifestyle and don't particularly desire one.

Il really hoping to maximise my deposit over the next few months so that I can put down 20%, so that will be a big factor.

I’d say 25% too as you need to afford to buy other things, holidays too. I’m saving for a deposit and wondering how much to take, I want a nice house and I figure at some point I might have an inheritance (can’t assume) so want to get something good but also don’t want to spend too much as I love my holidays. I’m saving £1250 at moment as living rent free, but pay most bills. So I think for me 25% of my income would be right

A third would be normal. But it depends on your other outgoings.
Ours is only 18% of our joint income and we are still skint as we have other high outgoings (elderly horse and nursery, both of which are greater than the mortgage). But that’s just to do with a strange way our life has panned out. If I didn’t have horse and nursery costs we’d be fine at 1/3.

@Darbs76 good luck with the saving! I've never been able to afford to holiday abroad every year, as funding it all for me and DC alone, but I'm hoping to manage a week away and the odd UK weekend from now on. Ultimately, I'm quite a homebird though.

@Megan2018 yes, the childcare days are thankfully behind me. Those were tough, even with tax credits.

Sorry OP, but I'd say 300-350 pm too. You'll be losing your CM and CB in the not to distant future too.

you are on a similar salary to my DH and I (X 2). We had a monthly mortgage payment of £640 which we found a doddle (first mortgage so we had no idea when we bought our first home how much we'd afford to repay monthly so were being cautious!). We ended up overpaying loads because of this.

For me, on a single wage as your own, I'd pay up to maybe £600 (but I am very money conscious and don't spend a lot!)

The general advice is for the mortgage payment to be 20-30% of your income.

I have a similar income to you, OP. I take home £1630 and am a single parent to a 16 year old as well.

I only took out my 30 year mortgage 2 years ago and my payment is £444 a month. I actually round it up to £500 - I figure every little helps!

I also manage to save every month too, so I’m happy that I can afford the repayments.

I am slightly worried about losing the maintenance and child benefit once my daughter leaves education, so I am hoping to reduce my outgoings where possible. Though hopefully I’ll save a small fortune not buying bread/milk/snacks once she’s gone off to university

Thanks @AddUpToNothing That's reassuring as those are the figures I've been estimating.

The way I see it, when the £184 CB and CM stop, I'll be stopping paying DS phone bill, his pocket money, lunch money. That's comes to £100 of the £184. He's adamant he won't be going to uni, so he'll be working to pay those things. If he changes his mind on that, of course I'll help out, but my salary will also still be increasing at that point. And I'll be expecting him to get a PT job then too.

The minimum I have planned to spend on mortgage is about £380. And that will be if I can buy somewhere cheap, 15% deposit, and still have enough savings to do it up fairly quickly. I won't get "nice" and enough space for that amount.