Mortgage - percentage of income and maternity leave?

[Emslifechoices]

What percentage of your monthly income (net) do you spend on your mortgage?

20% of our combined income

About 23% excluding bonuses. 15% when bonus is taken into account though its discretionary and at the end of the year so I don't typically plan day to day living expenses around it.

About 25%

about 15%

About 25%, but I usually stick another 15-20% above that into my offset account. I've 22 years to go on this mortgage, but I am on track to clear it in 9.

Thanks all. That's a lot less than I was expecting. I was thinking more like 40%... Is that crazy?

Currently 16% soon to ride to 32%. I wouldn't feel comfortable with 40%. When interest rates rise you are jiggered and have very little wiggle room. I'd think very carefully even with a fixed rate deal, unless your income will go up significantly before the end of the tie in.

I would say 40% is too high unless you have no kids, intent to keep it that way and are pretty sure of significant promotion and salary rise in next few years. When interest rates go up, that could get really scary really quickly.

The numbers you see above are pretty typical for most people excluding first time buyers according the stats.

It really depends on your stage of life and how much you earn overall. For a couple with no kids, 40% might be fine and still allow for a pretty great lifestyle. Also, basics like food etc make up a larger portion of your spending the less you earn. So the less you earn the less of a percentage of income you can spend on your mortgage and vis-a-versa.
So if you have very few costs (like childcare) or you earn more than average, then 40% might not be crazy.

DH and I make a good living but we would rather live in a smaller house and have a mortgage that allows us to have the childcare we need, take holidays, eat out, save something each month, and absorb future rate rises. I am really conservative financially though:I hate money worries and I have seen it ruin marriages so just think about what you want your life to be about and tread carefully.

Budget for the one salary. Better to find out it's not as much of a struggle as you expected. Also account for significant interest rises.

Do you mean 40% of your combined income. But then how do you survive when on maternity?

We decided to take a smaller house with a smaller mortgage too. That leaves us with money for repairs, holidays, a bit of luxury. Obviously if you ear a lot then 40% is nothing. For example a combined income of £200k will mean you still have over £100k to live on!

Also rates are cheap now. If it's 40% now what is it when it rises?

FWIW we started off at 20% and down to 10% now with a lot of luck on rate drops.

I assume you are thinking of having children soon. Like others say without children you can afford a lot more.

Around 25%

I don't think the percentage is necessarily the be all and end all. Largely because it is relative to the size of the income in the first place.

20% of a £1k a month income is a much bigger deal than 20% of a £5k a month income. The first only leaves you £800 to pay all your bills and everything else out of. The second leaves you £4000. If your mortgage is 40% of £5000, you've still got £3000 a month to cover everything else.

Note: talking net income here.

I agree, a % is pretty meaningless, it depends on your income and what other expenses you have. For example, our mortgage is about 28% of net income, but until recently, childcare costs were probably another 20% on top of that. Whilst on paper, we still had 72% of income left after the mortgage, childcare and mortgage payments amounted to about 50% of our net income. Add on all the other "usual" expenses and things were tight.

The mortgage is still 28% but we don't have childcare to pay for any more and we're much more comfortable. No change to mortgage or income levels, just "other" expenses have changed.

5,000 net sounds like a lot but it really is not enough to spend 40% on your mortgage if you have kids. It implies you are borrowing more than 5x your income and in London, if you have kids, would leave you pretty skint.

A worked example:
*2,000 for a mortgage
*1,750-2,000 a month for childcare (nanny-share or two lots of nursery fees)

All you would have left is 1,000-1,250 for savings, food, holidays, bills, clothes as well as a cushion for future rate rises. Not really enough in my opinion.

Spending 40% of your income on housing if you have child care costs / school fees only makes sense if your take home is in excess of 10k net a month (before your pension contributions).

I agree with LondonGirl except that I think you'd be skint at £5k or less wherever you were in the country if you had a mortgage at 40% and childcare costs!

Thanks for all your messages. I agree that 40% on mortgage and then child care on top would be crazy. DH and I don't have have kids yet (TTC in next few months or so). Once we do have kids I'll probably be SAHM anyway as would only earn about same amount as child care would cost (especially looking at the amounts detailed above!).

So I'm thinking the advice is work out how much can afford if only have DH's income not mine (esp if I'm going to be on mat leave (statutory) and then SAHM)?

Definitely if you plan to SAH. If you plan to go back to work then work out childcare costs by ringing a few nurseries around you and ask about prices. The prices quoted here aren't crazy. I pay £1k a month for DD full time. But both DH and me get childcare vouchers from our employers which works out to be just under £2k a year savings.

Whatever it is if you plan to TTC so soon, you need to factor in the child.

Not everyone has childcare costs though. That's parts of why the percentage thing is so silly. On £5k a month, paying 40% mortgage and £1.5k mortgage costs you'd still have nearly double left compared to someone paying 20% of a £1k income for mortgage costs.

40% mortgage costs (£2k) plus £1.5k childcare costs, that is.

We have an interest only mortgage on a low rate and its only 6 percent of our joint net income but we overpay so the payment we chose to make is actually 30 percent of our net income. It is all relative though. We could double it to 60 percent and still be ok for living and school fees.

Yes, guidelines are just that and won't apply to everyone. High earners and the childless can ignore them!

To be in a position where you could comfortably afford to spend 60% of your take home pay on your mortgage, send your kids to private school and still maintain a reasonable standard of living means that you'd need joint gross earning of at least 200k (more if you wanted to travel, put money in your pension etc).

That really only applies to 5% or less of the population.

One other big factor is what your goals are. My husband and I could afford to borrow more but we want to retire / semi-retire as soon as we can which means saving and paying down our mortgage are top priorities. There ins't a formula-- just think about what you want for your life.