Mortgage as a % of take home pay

[Needmorecoffeeortea]

Is there a sensible guide for this? I’m looking at houses and we are moving to a more expensive area. Our current payment is around 12% of our joint take home pay. In the new area it could be more like 30% for the type of house I want. It makes me nervous!

Is it about 20%?

Ours is about 25%. It's a lot of money yes but we can afford it. You'll always pay your mortgage before anything else. Obviously less is better but that was the move we needed to make for jobs and our family

The old saw was always that not more than 28% of gross household income should go on a mortgage but I don't believe it's a hard and fast rule (although I think some lenders calculate to it).

30% would be a bit beyond the upper end of comfort for me personally, especially up from 12%. We aimed at max 20-22% when we were looking.

Would other housing costs go up, too? Like home insurance, utilities, car insurance (sometimes expensive areas have high car insurance rates; ask anyone who lives in Didsbury or Chorlton in Manchester).

Ours is 17% but we overpay to take it up to 21%, thinking of increasing that to take it further to 25%.

I’d be nervous of an initial mortgage payment being 30%, that’s a huge chunk of your income, do you have savings that would cover 6 months of expenditure in the event of unemployment?

Ours is 17%. It feels comfortable, we are on low wages but live in an incredibly cheap area.

I'd not want to go over 20%.

We have savings for 6 months of 1 of us being out of work (plus good occupational sick pay and insurance also).

Council tax would go up by about £100 per month but other bills would be similar. The houses are a similar size. It’s just the area that makes it expensive.

I think the percentage really depends on career prospects, other financial commitments and overall level of income.

E.g. 2 children in a state school, SAHP so no childcare costs and 10k/month after tax income. Mortgage of 3k, or 30%, no problem at all.

2 working parents, joint income of 10k, 2 children in independent schools + an after school and holiday nanny and the 3k, 30% payments could be a stretch.

We would be left with around £1900 after bills including childcare but not food.

I think the recommended limit is 30% of take home pay but you can go up to 50% in certain circumstances. Google websites which cover this. There are ones which you put your income and fixed costs into which tell you how much you can afford I mortgage payments.

Are you also able to save each month and still leave you with £1900 per month?

Food, clothes, “stuff”, petrol does add up. That’s before holidays etc.

If you do have a 6 month saving buffer that makes it better but remember that if you need to use that then it will need topping up at some point.

I’ve been doing some serious analysis of our spending with a view to getting mortgage free in the next 8 years. It’s surprising how the “stuff” adds up each month. A coffee or meal out here and there really does add up.

1900 sounds like a reasonable amount. Do you know how much you're spending at the moment? Would you need to cut back a lot or just save a little less?

Are earnings and childcare costs likely to change in the next few years to make the mortgage more/less manageable?

Sorry, 8 years should be 6. We are doing every thing to be mortgage free in 6 years and it’s been really interesting analysing our spending over the last 12 months.

If you are reasonably familiar with excel this is something easy to do.

Also remember to check all quotes on renewal and be absolutely regimented with this, it can make a massive difference to monthly outgoings to swap providers where you can.

We have been considering moving house and for the property we have been looking at we would have to borrow almost the most we can and stretch our mortgage to 36 years. I think the mortgage would be 30% of our wages but I worry as some of the other costs are a bit higher including travel, childcare as we would need breakfast clubs, higher council tax, higher life and house insurance etc. Also if interest rates were to rise which they inevitably will during the next 36 years we would be screwed. I'm also concerned that we wouldn't be able to save, unable to afford home improvements or to replace the cars when they are too broken to be repaired.

It's so subjective. When I got mine a couple of years ago it was 25% and that was really comfortable, because it was just me! Now with pay rises it's only 15% which is too low but I can't raise it until fixed-term ends.

Obviously if you had kids/expensive habits/ other debts etc 25% would look very different!

The thing that worries me with a higher mortgage is often the other utilities increase too. Some of which you can’t even gauge until you move in.

@JoJoSM2 we would have to cut back a bit. I’m not entirely sure where our money goes just now. About £1200 is saved each month but the rest is spent. I know we are not careful and don’t have to think about small purchases and days and meals out. So yes that would have to change.

@Loveislandfan our current house is the same size or actually bigger than the ones we would be moving to so utility bills should be the same or less.

@Winenotttea the £1900 would have to include all spending and saving. We both have decent pension payments already taken out though.

About 20% of DHs salary probably 15% if you included mine. We have a 5 bed house in not a great area, looked at a nicer area but would add at least 175K onto our mortgage. We decided to stay out were mid 40s and want to pay off mortgage not add to it.

Mine's 10% of my take home pay, but I'm a single parent so it does make me nervous to take a bigger mortgage in case I can't work for a while for whatever reason

Hm... It sounds that with careful budgeting, you'd still have a little left over every month. But it will require effort and cutting back a little.

Honestly 30% sounds like absolutely nothing to me but I am in London. My rent is 50% of my take home pay and I’m looking to buy a small flat, the mortgage will be about the same. £1900 is a fuck load if that’s after all bills and childcare. Save £900 and still have 1k disposable income, that’s £250 a week which seems like more than enough unless you have astronomical commuting costs that you haven’t factored in. As a single person I budget £100 a week and save whatever’s left at the end, and I honestly don’t struggle - I shop at Lidl, make a load of cold lunches at the start of the week to take to work, cook freezable dinners and have enough left over for a few meals out per month

TBH yes £1900 is ridiculous and we should have loads saved by now. I’m embarrassed by how much we must waste. :-/ We do not have high commuting costs. Maybe £80-100 petrol per month between two cars (no car finance).

Do you use Monzo? It tracks everything you spend in real time and you can set budgets for different things like eating out, groceries and socialising and see a list of everything you’ve spent per day, really helpful for tracking where you’re chucking money away. I’m just marvelling at the responses as I’d love it if my living costs were only 30% of my salary lol

Ha! If I spent 25% of my salary on mortgage payments then I would be 50% under the cost of a property on the area I live in.

My rent is a third of my income for a start and then I save another third (for a bloody deposit). The other third is for bills and disposable. Therefore I am looking for a property that is almost 70% of my income and even that gets me a fairly mediocre property!

How on earth are people spending only 20%!