Household income £83k gross / what mortgage is affordable

[ohwellthenisaid]

Hello,

I will need to speak to a mortgage adviser, but thought I would ask for some opinions here first.

We would like to move house to a better area due to school catchments. We would also like something a bit bigger and with a private garden.

I earn £45k, husband earns £38k, plus child benefit of £159 per month.

So monthly incoming of just under £5k.

(Current mortgage is £825, so very cheap, I know. Fixed rate of 1.88% for another two years.)

I'm just wondering, if anybody has similar income, how much would you feel comfortable paying to your mortgage?

Very lucky in that due to working shift work, we don't need to use much childcare, so only pay around £100 per month.

Food around £400 per month.

Bills (excluding mortgage) come to around £1,300 per month.

I think you will get a lot of different views on this. It completely depends on what sort of lifestyle you want to live. Do you want fancy holidays and cars. How much do you want to put aside each months for savings. Some people will say buy as big as you can realistically afford, and put everything into your mortgage. my DH is careful with money so would never borrow the maximum we could, but I know others who would.

@Applesandpears58 yes, good point.

I wouldn't say we are lavish. We don't have designer clothes or expensive hobbies or anything.

We like to be able to eat out though and a few holidays per year, but usually cheap self catering type holidays.

My salary has increased a fair bit over last few years, and we managed fine before, which is why I'm thinking "go for it, you managed bedore, you'll manage again" and get the money going towards house payments before I get used to having it and spend it on nothing.

The other part of me panics about having a huge mortgage.

I think it's pretty normal to look at around 25% of net pay? So around £1200-1400 would probably be manageable and build in some stress test for interest rates?

Yes, that's the issue though.

We are in a flat, and it's a big price jump to a house. A mortgage with a payment of £1200 definitely wouldn't be enough to get a house.

£1400 probably wouldn't either....unless it was one requiring a lot of work, which we are not really able to do.

We did 2k on that salary. (This was also when interest was low, so £1.1k was mandatory and £900 overpayment).

That's good to know, thanks.

I've been trying to look at what I've been saying towards a house in past few months and it seems to be around £700.

So I think we'll £825+700 = £1,525 should be manageable. Plus the extra costs associated with having a bigger property, I suppose.

Hmm, the only issue you are going to have is the jump in interest rates alongside a bigger mortgage. For instance we were on roughly the same rate as you but a £1000 monthly payment but when our fix ended the best deal we could get increased repayments to £1500, and that is without a bigger mortgage.

Yes, I do worry about that.

We are at a similar income, out mortgage is around £1100 at the moment and will be £1200 ish in April as part of our mortgage fixed rate ends.

We have a mortgage of approx £215k on a house worth around £500k.

We are absolutely broke though as we have an ancient horse and childcare costs. But assuming you don’t have an ancient equine I think a mortgage up to £1500 is doable.

Thank you that's useful. And no, we do not have an ancient equine!

We are very lucky to have low childcare costs.

I just feel that if I don't put this money towards a house we are going to get used to having the extra income and just spend it and end up with nothing to show for it.

(We have been paying £825 mortgage for quite a few years now, but I have had a pay rise since then, plus childcare costs dropped significantly. So I feel if we could afford £825 before, we should comfortably be able to afford more now).

What are your future expectations regarding earnings?

When I bought my house I borrowed as much as I reasonably could, and I started off paying my £1100 mortgage payment out of around £2800 take home so let's say 2/5ths of take home. However my earnings increased over the subsequent few years and at my current salary the same mortgage payment is only 1/4 of take home which is much more manageable.

Interesting question as we have a similar income 88k and are considering moving! I only work 2 days a week so could easily increase that once childcare goes down. But we only pay 741 a month at the moment so are nervous to have that increase 😬

If you feel your current monthly payments are low and you can afford much bigger, why aren't you overpaying now?

I was going to say the same thing. If you don't want to squander the money, make large monthly overpayments to reduce your debt. This would be a good indication of whether you can afford it. You could pay 2k for the next 3 months and see how that impacts your lifestyle.

I know that letting agents use an affordability check of between 30 and 35 times the monthly rental cost. So 2400 per month would require a joint annual income of 84k. This seems like a very high monthly cost to me. I wouldn't want to stretch myself that much.

There are so many influencing factors. What are house prices like in the area you want to live? How old are you? When do you want to retire? How long until your children leave home?

How much are you saving per month atm? How much do you have in savings? Have a look at Dave Ramsey on Facebook

You have a good income, remember to save some, you don’t have a pet either!
Allow funds for Christmas/ birthdays, and general house maintenance, and travel, even if you don’t drive.
i live alone, and earn much less, I eat very well, about £70 ( lots of fruit/ veg), if I cut back £50 would be ok, cat about £20 a month.
i save, and plan for what next