What is your mortgage vs earnings? London-based

[onthem0ve]

We are making an offer on a house and have started getting cold feet due to being a significant increase in value for us that our current house, which we are selling.

We will be taking out a new loan and this will amount to about 600K in mortgage. DH and I have a joint income of about 250K. Does this seem reasonable or are we overstretching ourselves? I'd love to understand if it's quite a normal amount for London or if people are generally more risk averse and take out smaller loans.

We have stress tested the numbers and are comfortable with a 5% interest rate, plus we believe our jobs are secure. We're not tied to a particular timeline but really like the house we viewed and could see ourselves there for a while. Equally we could wait a bit longer if it means having a bit more equity in our current place.

Not in London but I'm in an expensive city.
First time buyer. Joint income of about £200k and our mortgage is over £900,000.
No kids.
Broker said it was 'more than affordable'. Bank seemed to agree

It's only around 2.5 times your earnings so not that much compared to your (incredible!) salaries, considering banks usually offer up to 4.5x. I'd probably try and overpay a bit if you can though, especially at the beginning when the most interest will be being added.

Mortgage is 4 times joint earnings. We're hoping for promotions in the next 12 months which will reduce that ratio to 3.2 times earnings, but time will tell.

Strange questions peoe ask when its common knowledge that its 4-4.5 x income and even higher depending on profession. I would like to know what jobs pay 200k where you don't need common sense.

Do you have children OP? Have you accounted for childcare costs / potentially reduced hours (as a couple) if you both can't stay in FT roles so less earning capacity?

I think it's less about what you can borrow and more about what you have borrowed, in terms of the original question.
We could have borrowed way more than we did, I just didn't feel comfortable at that point. Instead we borrowed less, bought a more modest property that had potential to make bigger if we wanted to. If we didn't, then we weren't paying for extra space we didn't need. But I am extremely risk averse. I think we 'only' ended up with around 2.5 times our salaries combined.

You are not going to be starving even if you pay 10k a month mortgage you have another 10k to spend each month...
It s not about % is it?
You know your lifestyle
Do what you want to do

That sounds normal to me. We did similar and I don't regret it. Bonuses and pay rises meant it shrank fairly quickly.

My only caveat is that our house has increased in value by around 50% in the last 10 years which helps the remaining mortgage seem smaller. I'm not convinced London will see those sort of fast price growth spurts again, though who knows.

Also to echo pp make sure you budget for any childcare costs / Mat leave that may come along.

There are some good 10 year fixed rates atm as well which might make it feel safer and more predictable as inflation goes nuts.

Considering your income that doesn’t sound high to me.

We took out £430k on a mortgage when in London but our income was significantly less than yours!

Only you can know the answer to this....however I work out that your net monthly pay would be around £12k, and a 5 year fix could be about £2.6k a month (same for a 10 year fix).
If you do a 10 year fix and your jobs are relatively secure, is just over £9k per month take home between you and DH enough?

A £250k combined income doesnt give you £20k a month

That would be more than affordable for us.

We took out a mortgage of 4.5 times our combined annual income and we managed just fine paying that even with childcare to pay for. We also earn a lot less than you which means that the actual income after mortgage payments we were left with was much much lower than yours would be.

Joint income of 200k and I wouldn't touch that size of mortgage as it's a big stone round your neck, life can change on a dime. 300k is the max I'll consider.

But we're all different

That ratio looks very normal, though it depends how much your outgoings are and how much you can cut them back. I'd think about whether you can manage with: I) risk of one of you losing your job, II) interest rates >5%.

Also, for as long as inflation is higher than your interest rate you are better off minimising repayment and letting inflation erode your debt -- provided you are happy to take a risk in investing the cash elsewhere.

At a similar income we have limited ourselves to a smaller mortgage - it works out to just under 20% of our combined net income, not accounting for bonuses etc. That feels comfortable to me as it means that we're able to save / invest a good amount each month. And if one us decided we hated our jobs and needed some time off, we'd be absolutely fine. That's quite important for my peace of mind.

Apologies mis calculated
But principle is same
Hiw much ££££ left over each month and what is your lifestyle?
What contingency if one person is sick etc?
Maternity pay?

Seems fine unless you already spend shitloads on public school fees and oh I don’t know, have a huge gambling problem.

Your question seems a little naive so I would recommend sitting down with a broker to explain how mortgages and outgoings/percentage of income is related.

I assume the people earning big bucks on this thread have the intelligence to work out how much your mortgage payments will be as a percentage of your salary and whether that feels unmanageable, that's what the rest of us lower earning folk do 😀

This comment is pretty funny, I have to say I agree with the last bit 😂

I would like to know what jobs pay 200k where you don't need common sense.

😂

We have the same income as you and our mortgage is £530k, which is more than doable :)

This seems incredibly risk averse! Are your jobs very insecure?

Do you live in a cheap area where you don’t need a big mortgage to get a decent sized house?

@onlywork55

Nope we live near London and have secure jobs. Bought in 2012 before prices went mad, small 3 bed, extended to small 4 bed, so mortgage is small. Prefer modest house and low debt, most of our peers have huge houses and huge mortgages.

Took 474k mortgage on what they calculated as my £144k a year salary. Just me as DH wasn't working at the time. Had to put up 15% dep so around 90k.
Mortgage is just over 2k pm currently but hoping will go down when remortgage as house has been fully renovated.

Others have said about lifestyle and job security which only you know.
I work as a contractor so can be let go of at anytime but it's not happened in my career to date...... (touches wood) and, whilst house isn't my dream house, nothing of this ilk has come up in the area since so glad I but the bullet. I'm London / Essex borders.