How much would you feel comfortable borrowing?

[GettingVerySleepy]

I have a rough idea, DH has another idea, and I'm wondering what other people would do.

I earn £47,000 and will go up to £60,000 in 1 year with around 95% certainty. DH earns £20,000. We are 40 (me) and 46 (DH). We are unfortunately pretty much starting over again financially because DH lost (well gave away because he's too nice) everything in a divorce a year before we met. I had savings at that point but put them all into our old house which has drastically lost value since we bought it. If we sell it which we haven't had any luck with so far it will be for around £20k less than we paid and we will walk away with hopefully £25k for a deposit on our next home.

Staying in our old home is not an option because we have moved to a different area of the country for my work.

We have a car that's fairly new and paid for. No children. Other loans (my student loans) that we pay £200/month for. So how much should we borrow to buy a new house? We want a house that we will love and stay in forever. On the other hand we want to go on holiday from time to time, go to restaurants sometimes, etc. Given that DH and I are both clearly bad with money given our mistakes in the past, what would you do given our ages, income, and lack of savings? We both like our jobs btw which are about as stable as jobs can be in this economy. Thanks for any advice you can give us!

Any mortgage advisor will take you through 'affordability calculations', intended to check you can afford a mortgage. These take account of all your costs and debt, so providing you tell them everything (and you must!) it'll be an accurate measure of what you can probably afford.

But everyone has different spending habits and priorities. So you can then 'adjust' this 'affordability' figure in your head, depending on your personal circumstances. For instance, if you have a hobby collecting rare expensive somethings, and you don't want to give it up, you should borrow less to take account of what that will cost you!

You need at least a 10% deposit, which would allow you to borrow around 250k. With the stamp duty threshold at 250k, it would be sensible to look for something under the threshold.

If I were you I'd go for something well under that amount if you can to get it paid off as quickly as possible. Your DH's age might prevent you from getting a 25 year mortgage, you might be looking at 20 years instead. But even then, who wants to be paying a mortgage off in their late 60's?

Ok I was thinking £250k too originally.... then got carried away by houses listed at £325k on rightmove and started thinking "maybe we could make it work...." But realistically £250 is a better choice for us due to deposit and stamp duty and age.

AKiss, our plan is to make overpayments on the mortgage and get it paid off as quickly as possible. If we had a £230k mortgage (after deposit) I think we'd be able to overpay by £500/month. That way the mortgage would be paid off in 14 years according to the MSE calculator (assuming 5% interest rate) leaving us mortgage free by the time DH reaches 60.

I dont think you say where you are but I'd be looking more in the £200k bracket tbh. 4 times your current income multiple is approx £240k so that is the highest mortgage you would get if I'm doing sums right. it depends where you live and whether you want to push yourselves or not.

Maybe look for a bit of a project, so a smaller mortgage but use the overpayment money to do up the house. You have no children so a good time to do it.

Thanks for the replies. Poocatcher four times our current income is 268k but then I guess you have to take away our student loan? Is that where you worked out £240k? Anyway if we go for a house at £250k we would need a mortgage of £225k as we're lucky in that my employer will pay the stamp duty, estate agents fees, etc. so I think at that level we wouldn't be pushing ourselves too badly plus when my income goes up we'll have a bit more margin (and if it doesn't which it almost certainly will then we'd still be okay).

7to25 a project would be good except for he fact we can't do DIY to save our lives and flat pack furniture is about our limit, seriously.

Max 250k sounds the sensible (especially what with stamp etc). In reality I find it often depends what you can get for your money in your area, and how good you are at squirreling money.

Both times, I've borrowed slightly above my comfort zone because the cheaper houses were just obviously dodgy, and a bit more got me a flat/house I was more confident would retain its value. I expect that depends on area, I've always been pecking around in the bottom of my local market. Hope it all goes well!

I am old enough to still go with the 2.5 timed joint salary and 3.5 times sole

So I would borrow considerably less

Crazy, yes the houses where we live below £250k really don't appeal. I keep thinking "we'll we could live there but it would be noisy/dangerous/cramped" when we drive by one.

It's expensive to move so it doesn't seem sensible to buy a house we know we wouldn't be happy in only to move a few years later. So I think we'd do better buying around the 250k mark as I feel confident with our lifestyle we could quite easily afford the payments plus overpayments plus save.

Bound, I guess I don't really understand the 2.5 joint salary thing and the logic behind that. It seems like a joint salary situation would offer more security rather than less as there would be at least some buffer in the event one of us loses our job.

Nationwide have some quite good calculators on their site which can help with affordability, sample interest rates/repayments depending on loan to value etc.

One thing you should seek advice on is the situation with your employer paying stamp duty and moving costs as that could have implications on your income tax (disclaimer, my tax exams are a long time ago and I don't practise tax so this isn't professional advice - but anything where employers are paying costs that 'most people' have to pay themselves is always worth getting advice on re income tax implications. They could have an effect on your tax code and reduce your take home pay for at least a year and you might have to factor that into the mortgage application.

Thanks, rock, I've checked the nationwide calculators and it looks like £250k is confirmed by them. I will check on the tax stuff.