Am I just dreaming?! Getting a 5.5 mortgage

[Keepgoing88]

We have seen our dream home, however it would mean getting a mortgage which almost 5.5 our 70k salary. If it helps we have £400,000 deposit as we have made money from property. Is it ever going to happen? Planning on speaking to a broker but have a feeling the answer could be no.

5.5x our salaries. I have done a few searches online and we can get an agreement in principle for £360,000 but would need £400,000

Nationwide are going to be introducing 5.5 mortgages so might be worth speaking to them.

Do you have any savings you can put towards the deposit?

If you find one make sure your rates are fixed, as I lived through times when interest rates went over 14%! Unlikely now, but they are extremely low now and even a couple points up will change from just about manageable to unaffordable.

I think the new nationwide ones have a tie in of 5 or 10 years. Not sure as they are not released yet and I only read an article in the paper this week.

I know it's not what you asked and I'm being one of those annoying people missing the point, but that's a huge mortgage for that salary, have you thought about if interest rates go up? Where are you in your career and family trajectories? You're in a hugely enviable position of having a fantastic deposit, you must still be able to get something special much more affordable?

@kickergoes I think that is what we might look at. So a property £100k less would put us in a better financial position but just me a beautiful home I’m sure

My SIL & her husband purchased their dream home which, even at that time was an eye-raising stretch for them. BIL lost his job and now it is a stone around their neck and they are constantly counting pennies.

My personal feeling is that life is for living. I’m happier with a smaller mortgage so that we have money available for experiences. We also don’t overly stress if something breaks down and we need to replace it. SIL’s children are currently small but will grown into teenage money pits...

I think it depends on how you structure the rest of your expenses. As a rule of thumb, your monthly housing costs really shouldn’t exceed 25-30% of your gross income, so I would run those numbers to see what you should really be aiming for as your budget ceiling. If the new place falls into those parameters, then go for it! If not, I’d move on and find something a bit less expensive. Being house poor is the worst and not something you can easily escape once you’re in it, especially if you buy at the top of the market and then prices deflate.

@Keepgoing88 whereabouts in the country are you? I'm sure £500-600k would still get a lovely home in most areas though I appreciate it varies dramatically.

Are you a first time buyer? The new nationwide mortgage is ftb only.
The online affordability calculator is launched on Monday so have a look then.

What does a budget look like with that as a mortgage repayment? It sounds a lot, but will really depend on how that 70k is earnt between you as to what your take home is.
FWIW, we earn 70k between us (very uneven split), and I dont fancy 1.5-2k repayments each month. It would be doable, but not enjoyable.
It also depends if you might get pay rises in the coming years, and what childcare might be needed, if any.
But then a 700k plus house is pretty rare round here.

We recently got a mortgage with Halifax through an independent broker and got 5 times our salary, but our salary is higher than yours and we didnt take the full amount offered in principle.

We’ve spoken to a mortgage broker recently who has told us it’s all about affordability tests and size of deposit now rather than salary multiples

It's a massive mortgage and it does seem that lots of people do it . How much would the repayments be compared to your take home? Can you actually afford to do anything else as well? Have spare money. ?

Is the £70k joint? I know a few banks are offering 5 or 5.5 times to couples earning over £100k, and Nationwide will offer 5.5x to some FTBs, but other than that it’s tough... your own bank with your existing mortgage would be your best shot, I think.

You need to factor in the running costs of (presumably) a bigger house as well as the mortgage payments. Utilities, council tax, maintenance, garden stuff like maintaining paths and driveway, it all needs income.

Not a chance. At 3% mortgage interest rate, your repayments would be £1900 per month, so 50% of your take home pay assuming you don't pay into pensions. If the interest rates went up to 5%, the monthly amount would rise to £2400

What happens if one of you is sick or loses their job? (Or the main breadwinner does, if the 70k is joint)

But, I'm probably more cautious than most. Our mortgage is only 15% of our take home pay and we could survive on one wage if needed.

You need a £400k mortgage and you have a £400k deposit?

There are so many factors that come into play that nobody here can give you an answer. How old are you? How long do you plan to work? How safe are your jobs? Kids? Current spending?

You have a decent deposit and if you’ve got a good few years to work then it could be doable. You need to do a massive amount of number crunching and see what your outgoings are, what is left over, how much spending is discretionary, how your income/outgoings are likely to change, what if one of you lost your job, if your’re willing to change your current lifestyle etc etc.

We’re about to take on a new 4.5 x joint salary mortgage at 42 with 3 small DC to build our dream house, but the equity should be 2/3, I have a safe job and we’ve planned in a way that we could manage on one salary if necessary. Interest rates are super low and with that deposit you should be able to fix in a low rate for a good few years. We got a 15 year fixed rate (but not in the UK) which makes budgeting easier.

Get a good broker and crunch your numbers in Excel until your eyes go square (luckily DH is in finance so I spared myself that task).

We’re borrowing similar but our joint salaries were £110k when we applied for the mortgage and are going up to £130k in September due to a promotion. The monthly payments are going to be £1900 which scares me!

We borrowed slightly more than you need to against a similar joint income in 2019. It was roughly 50% LTV though so the bank were more relaxed. It’s worth asking.

I would be tempted to use the money you have and buy something smaller and not get a mortgage at all
I dream of being mortgage free...

I think it would be unwise. The repayments would represent a huge chunk of your take home joint salary. At some point interest rates will rise and it could become impossible to keep up repayments. You could also end up in negative equity.
Surely you can find a very pleasant house for £5-600,000 in most parts of the country.

Yes, as it’s about fifty fifty koan to value I think you’ll be allowed this but depends on your other outgoings, Ie do you have childcare commute etc?

I only wanted to borrow twice my salary seven years ago and rhe natwest offered me more than five times as We had 75 percent deposit as we had no high expenses. The bottom line is if you pass the affordability checks and have a high deposit they don’t give a shit if you default, they are pretty much guaranteed to get their money back if they repossess and go to market.