mortgage affordability

[covmutley]

I would like some advice and opinions please.

I am looking to move house but worry about affordability, especially if rates rise. I have looked at my outgoings but it is hard to account for the unforseen.

Our joint income is circa £63-65k. No credit card debt but no savings. One car owned outright one lease car @260 per month. 3 young kids all at school so no child care costs.

Would you say that a mortgage payment of £1,200 a month is affordable without living on bread and water? I think it is, but wonder if others have the same or a similar scenario.

Thanks in advance.

[Kateg28]

The repayments are similar to ours at the moment although our earnings are different to yours.

We do not have any car payments as own them all outright but my season ticket loan payments are about the same as your car finance. I think it is doable but you won't be eating out every night. It will be tight but still a lot better than a lot of families are experiencing.

[Vocal Minority]

At the risk of sounding facetious - only you can really know that surely, as your outgoings will basically be unique to you.

Figure out what you spend every month on cars, petrol, food, clothing and medical stuff for the youngsters etc etc. Pop £1200 on top of that and see how much you have left out of your joint income.

If said number is pleasing to you...you can afford it.

[covmutley]

Vocal Minority said:

At the risk of sounding facetious - only you can really know that surely, as your outgoings will basically be unique to you.

Figure out what you spend every month on cars, petrol, food, clothing and medical stuff for the youngsters etc etc. Pop £1200 on top of that and see how much you have left out of your joint income.

If said number is pleasing to you...you can afford it.

You are right of course, but we live to our means so if there are some people here with similar circumstances their experience would be useful.

[BoRED S2upid]

You can get very good 5 year fixed rates if your worried about interest rate rises. I've just fixed for 2 years at 1.89%.

[Testaburger]

Off the top of my head, £63,000 will bring a take-home amount around 3,500.

After mortgage, council tax and car payment, call it 2,000 remaining.

It's certainly doable, but as mentioned, it's down to your lifestyle. After a few hundred a month groceries, petrol, and the everyday stuff, where does that leave you, and how does that compare to your desired lifestyle?

You'll manage just fine, but I like to play it conservatively. I like to bank a chunk of savings, retirement cash foremost, and enjoy my lifestyle and travelling without worrying too much about mortgage affordability. If that meant scaling down, then that's what I'd do.

[Driver101]

Testaburger said:

Off the top of my head, £63,000 will bring a take-home amount around 3,500.

After mortgage, council tax and car payment, call it 2,000 remaining.

It's certainly doable, but as mentioned, it's down to your lifestyle. After a few hundred a month groceries, petrol, and the everyday stuff, where does that leave you, and how does that compare to your desired lifestyle?

You'll manage just fine, but I like to play it conservatively. I like to bank a chunk of savings, retirement cash foremost, and enjoy my lifestyle and travelling without worrying too much about mortgage affordability. If that meant scaling down, then that's what I'd do.

It would be around £3500 per month based on one person earning £63,000 per year. Remember that they will both have personal tax allowances and if £63,000 is split in half they won't go over the 40% tax threshold either. So it could be as much as £500 per month more if that is the case.

Personal circumstances are completely different to everyone and have the habit of changing. Without a doubt taking home £3500-4000 per month a £1200 per month mortgage could be afforded. However not if you've got sizeable outgoings.

Kids and cars are expensive. Even though you own one outright, it won't last forever.

Only you'll know what you need to live. The question that I instantly think, if you aren't already paying £1200 per month for a mortgage, why have you no savings?

If you haven't been able to save anything, that would suggest to me that your lifestyle already takes up all your earning. Can you adjust your life to save the difference between your old mortgage/rent up to £1200 per month?

The other thing I wouldn't do is put myself in a position that my salary covered the bills and no more. It's sensible to allow some breathing space and be able to save some away every month for a rainy day.

[covmutley]

Cheers guys. No savings as extended our house, but we got a lump sum from inheritance for most of it. I do think it is affordable but it's the rate rises that concern me but I guess the answer is to fix for 5 years.

[ManicMunky]

We're in a similar position. Our mortgage is about £600 at the moment, and while we could comfortably double that payment (with some more left over to cover rate increases), I feel much happier about saving a pile of money each month than spending it all on a house.

Again, all depends on your attitudes

[northandy]

If rates went to say 5.5% what would the payment be then? Or is it fixed? How long is the fixed term?

[Testaburger]

ManicMunky said:

We're in a similar position. Our mortgage is about £600 at the moment, and while we could comfortably double that payment (with some more left over to cover rate increases), I feel much happier about saving a pile of money each month than spending it all on a house.

Again, all depends on your attitudes

That's the key. I'm all for spanking cash on enjoying life, but I'd rather it be discretionary, rather than a hefty long-term commitment.

[ChrisNic]

Is there an option of extending the term further to reduce the committed monthly payment and then make a manual overpayment (via standing order) each month. That would give you a degree of flexibility if things change and finding the £1200 each & every month becomes a struggle.

[Simpo Two]

Testaburger said:

I'm all for spanking cash on enjoying life, but I'd rather it be discretionary, rather than a hefty long-term commitment.

Houses can of course be sold, the only trick being to sell them for more than you paid, or at least not in negative equity.

If you can do it without impoverishing yourself, do it. I have a friend who didn't buy a house until he was mid-40s. I got mine at 25. So I have a nice 3-bed detached house with no mortgage, and he has a pokey Victorian terrace and a big mortgage and will have to work basically for ever.

[NNH]

If you're looking at a £1200 payment then your mortgage has got to be over £200k. That's a little high for an income of £63k, but manageable if you're careful. After all, in a few years time you could well have increased your joint income to £70k or more, while the mortgage will be getting smaller.

[Testaburger]

Simpo Two said:

Houses can of course be sold, the only trick being to sell them for more than you paid, or at least not in negative equity.

If you can do it without impoverishing yourself, do it. I have a friend who didn't buy a house until he was mid-40s. I got mine at 25. So I have a nice 3-bed detached house with no mortgage, and he has a pokey Victorian terrace and a big mortgage and will have to work basically for ever.

Couldn't agree more. I have "some" that are mortgage free or almost there, and I'm very grateful for that. However, I'm also grateful that I didn't have to stretch too far out of my comfort zone to achieve it. Ultimately, it is a big commitment, fairly illiquid, and has a large impact on lifestyle, so I'd certainly tread with caution.

[westberks]

With 3 young kids and what appears to be a fairly set income I'd suggest a 5 year fixed rate. If your LTV is favorable these are starting from around 2.29% and give you the security of settled outgoings for a decent length of time.