9k income - how much mortgage would be too risky?

[twinkie100]

Inspired by another thread...

We have 9k monthly net income. No debt, decent savings.

Two young DCs but by the time we move we will be out of the expensive nursery years - so just after school and holiday clubs.

How much would you be comfortable spending on a mortgage?

Currently £1.1k monthly mortgage, which we appreciate leaves us in a comfortable position but for the last 6 years much has been swallowed up by childcare - which is (finally) almost over.

Jobs are safe and one salary in particular should rise... would £2.5k mortgage be too risky? Mortgage advisor said even 3k fine, but that feels so high...! Do people take out such large mortgages?
Many thanks

3k in a 9k income isn’t a large mortgage it’s an appropriate one, you still have 6k left to spend each month. 3k would be a big mortgage if you had 5k a month.

Where did this 25% come from. Is it your own rule?

lenders prefer less fab 36% but will go as High as 48. It is based on how much money is left after, the op would still have 7 grand a month left based on your rule.

Over what term would the mortgage be, and would you have paid it off by the time you want to retire?

Most bog standard 3 bed semi family homes round me (South East England) rent for well over £2000 a month, and most families income will be much less than yours. I don't think it's that unusual to spend a similarly large amount on mortgage payments on a lower salary here either, out of necessity with our housing market.

Honestly, there’s no magic formula here.

Our mortgage is almost 45% of take home pay currently, but we’re still left with £7k/month.

The 30% rule is fine but doesn’t take into account what you need the remaining 70% for, and 70% of £3k looks very different to 70% of £10k.

In your case, you need to add up:
Current mortgage payment
ALL regular bills/outgoing a (down to the smallest thing)
All discretionary costs
A savings amount that you find palatable.

Take that figure and deduct it from your net monthly income. See what amount of the resulting figure is one that you would be comfortable not having at your disposal, and that’s what you have to increase your mortgage by without feeling an unnecessary pinch.

I'm a bit confused how you can claim child benefit if the RSU's mean you get a £9k a month net figure. The income limit for child benefit (£50-60k) should include RSU's as far as I am aware. £50k a year generally provides a net income of £3000 per month, assuming a 5% pension contribution. So the RSU's must be quite substantial and put above the threshold?

Generally RSU's need to be included in a self assessment tax return to make sure tax is correct. I may be wrong though as don't know all the details. Have you spoken to a tax advisor on this?

Our mortgage has always been about 25-35% of net income give or take.
But I wouldn’t borrow more than you need.

Our take home is half of yours and our mortgage is £1.1k and rising but we have a lot of equity (circa 50% ltv).

£2.5k sounds fine to me, particularly if you're at the tail end of expensive childcare. We're taking on £1.6k monthly with £5kish take home. and we're hoping to have kids soon.

We take home £6,700.

Mortgage is £1900,
Debt repayments are £760
Bills/standing orders incl. energy about £1150.
Food shopping is £600.

@theremaybetulipsahead sorry, I should have said I live in Ireland where child benefit isn't means tested.

We've chosen not too. Mostly because we've got used to spending an obscene amount each year on holidays and I can't imagine going back to camping (yes, I know there are in between holidays ), but also so we know we have the freedom to walk out of our jobs at any moment. The quality of life brought by those two is higher than the larger house for us. The balance could well change in the future though.