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.

@Ribb with amazing salary like yours you really deserve your dream home.

Hope husband manages to find a job soon and contribute.

Mortgage is just over 2k pm currently but hoping will go down when remortgage as house has been fully renovated.

Why would it go down when you remortgage?

I think a 600k mortgage is nothing to worry about on that salary but maybe just me. I assume with good disposable income you are investing in stocks and shares ISA too so in the future you could pay it off anyway.

Because they've paid off capital during the period, plus the property value will have increased so their loan-to-value will have decreased.

Our mortgage is currently around 3x income although it was almost 4.5x when we took it out - had to max out to get onto the ladder. Unless you have other major outgoings, 2.5x does not sound anywhere near overstretched.

Unless you had a massive deposit you wouldn’t even get on the ladder in London today with such a small mortgage!

Because they've paid off capital during the period, plus the property value will have increased so their loan-to-value will have decreased.

So potentially they’ll be on a better rate due to the LTV (although that might not actually be the case in today’s market) which might lead to cheaper payments, but unless they’re extending the term when they remortgage I’m still not sure how else payments would reduce?

@melcalfe if I'd been 'on it' I'd have moved areas before my son started school and could have got much more bang for buck a bit further out into either Hertfordshire or Essex. But it was my ability to earn this amount for the past 4 years and clear my credit cards that put me in good stead to get the mortgage and that took a bit of time. I was praying daily for us to get the house but I read too many house mags and watch too much Grand Designs and anything with George Clarke in it....... Starts making me think I need acres plus maid and nanny quarters 😂

@onlywork55
From what I understand, and I'm not an expert and will be speaking to my broker nearer the time, I should be able to get a better rate of mortgage next time once my fixed term is up. The house hadn't been touched for 60 years so needed lots doing. Have added an additional bathroom, utility, larger kitchen, driveway, garden office, new windows etc. The value has increased by about 160k now so this should also help. I'd love to make serious indents to the balance so will probably keep paying the same amount anyway.

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.

If everyone only borrowed 0.5x their income we wouldn't have a housing crisis!

A £300k mortgage on a joint salary of £200k is 1.5x earnings, not 0.5x

😆 I meant that, either way my point still stands

It's quite dependent on circumstances and personal preferences, isn't it? Our mortgage is currently about the same as our joint income. We were first time buyers last year and have paid off about £100k over the last 12-14 months but we are trying to prioritise being mortgage free as soon as possible and ideally buy our forever home (and maybe a second home) outright in a few years.

Our mortgage is 800k. Remaining 900k Is equity. 10 years to go. We fixed when rates were low for 10 years at 1.25% so know how lucky we are! We pay 7k a month for it but husbands salary averages 15k net a month so we feel ok with that. We have school fees for 3 children and bills etc of course and in Surrey so it Sounds better than it is!

We’re both London too, we’ve just remortgaged and ours is 1.8 our combined income. We have reduced the term due to interest rates so slightly more than we were paying before so affordable. We also have a baby now so didn’t want it to be too high

We’re not in London but within commuting distance. Our mortgage is 535,000 and our income is just over £150k. Our DC’s are in school so we don’t have nursery fees, only wraparound 2x a week. We fixed around March time at 1.99% for 10 years so our repayments are £2,000 which feels affordable.

We're in London. We are combined salary of over £150k and mortgage is 600k. We also have a lodger and still feel incredibly poor!

Our repayment is £2500

Our mortgage is a little over our yearly joint income, but DP is only 10 years off retirement and his income is the very substantial part
of our joint income. A lot will matter on your stage of life and what other outgoings you envisage in the future (for example,
children if you don’t already have any!).

Sounds fine to me. Long time ago, but 18 years ago we took a £420k mortgage on a joint salary of around £100k

All worked out fine payments wise

incidentally a friend of mine has just taken out a 1.2m mortgage on a 250k salary....

Our mortgage is about that size and we earn considerably less than you.

Would be prudent to extend your stress testing to 8% mortgage, and what if one of you lost your job?