Mortgage as a percentage of monthly outgoings.

[croyde]

People always talk of their mortgage as their biggest expense but the other day I totted up all our (married with 3 small children) monthly out goings and I have found that our mortgage is currently about 14% of our total spend, Granted it was 25% before the interest rate cuts back in the summer and it's interest only.

Our food bill is higher than our mortgage.

Boy! I need help to get the rest of the costs down.

[FarleyRusk]

You need more income. Can the kids fold letters and put them in envelopes?
HTH

[Welshbeef]

croyde said:

People always talk of their mortgage as their biggest expense but the other day I totted up all our (married with 3 small children) monthly out goings and I have found that our mortgage is currently about 14% of our total spend, Granted it was 25% before the interest rate cuts back in the summer and it's interest only.

Our food bill is higher than our mortgage.

Boy! I need help to get the rest of the costs down.

Please only ever do this comparison with Repayment mortgage not interest only. Depending on where you are in the 25 year repayment cycle the interest (within 6 years from the start) will be around 60% of the equivalent repayment mortgage.

So assuming your in that ball park your monthly outgoings would be 24% ish.

[Ozzie Osmond]

I always thought "interest only" mortgages were principally for the buy-to-let market? Most owner-occupiers would be wanting to buy the house, albeit over 25 years.

Or have you got a carefully considered bet on? Namely that inflation will erode the mortgage over time. With inflation now down almost at zero that might take a while....

If the mortgage is now only 14% of your outgoings it might be worth having a think about the whole situation to see if there's something more suitable for you. PH isn't the place to get that sort of specific personal advice though.

Good luck!

[croyde]

Welshbeef said:

croyde said:

People always talk of their mortgage as their biggest expense but the other day I totted up all our (married with 3 small children) monthly out goings and I have found that our mortgage is currently about 14% of our total spend, Granted it was 25% before the interest rate cuts back in the summer and it's interest only.

Our food bill is higher than our mortgage.

Boy! I need help to get the rest of the costs down.

Please only ever do this comparison with Repayment mortgage not interest only. Depending on where you are in the 25 year repayment cycle the interest (within 6 years from the start) will be around 60% of the equivalent repayment mortgage.

So assuming your in that ball park your monthly outgoings would be 24% ish.

Spot on but still not a big expense compared to some, but that is because I put my foot down about extra borrowing. The other half has accused me of being to careful and in her words " We should be spending everything on the mortgage so we can have a bigger/better house" just like her friends.

Boy! am I glad that I held onto the reins now.

[croyde]

Ozzie Osmond said:

I always thought "interest only" mortgages were principally for the buy-to-let market? Most owner-occupiers would be wanting to buy the house, albeit over 25 years.

Or have you got a carefully considered bet on? Namely that inflation will erode the mortgage over time. With inflation now down almost at zero that might take a while....

If the mortgage is now only 14% of your outgoings it might be worth having a think about the whole situation to see if there's something more suitable for you. PH isn't the place to get that sort of specific personal advice though.

Good luck!

Cheers.

Initially it was interest only as we had planned to move on within 5/6 years but 10 years later we are still here and yes it does worry me that in 15 years time the bank will want its money back.

Obviously the house will be worth so much that it will have been sold at a massive profit and a cottage by the sea will have been bought for cash and the mortgage paid off.

Errrrrrrr! Here's hoping.

[Welshbeef]

croyde said:

Ozzie Osmond said:

I always thought "interest only" mortgages were principally for the buy-to-let market? Most owner-occupiers would be wanting to buy the house, albeit over 25 years.

Or have you got a carefully considered bet on? Namely that inflation will erode the mortgage over time. With inflation now down almost at zero that might take a while....

If the mortgage is now only 14% of your outgoings it might be worth having a think about the whole situation to see if there's something more suitable for you. PH isn't the place to get that sort of specific personal advice though.

Good luck!

Cheers.

Initially it was interest only as we had planned to move on within 5/6 years but 10 years later we are still here and yes it does worry me that in 15 years time the bank will want its money back.

Obviously the house will be worth so much that it will have been sold at a massive profit and a cottage by the sea will have been bought for cash and the mortgage paid off.

Errrrrrrr! Here's hoping.

Oh I didnt realise you'd been IO for that duration....
Generally if your buying a residential house the reason for going interest only is a short term measure (in the main) where by the first year or 2 you need extra cash for white goods, beds, sofas etc, if its your 2nd place you'd already have most of this stuff so wouldnt consider it.

Or your fully stretching yourself & there is a granite guarentee that you have a payrise coming and as such can then up to repayment.

OR you have what you would have paid on the repayment paid into an alternative investment with the hope that over the life of the mortgage it will be equal or higher than the outstanding debt.

OR your planning that in 25 years time that the house price inflation will have erroded the debt meaning that when you sell in 25 years you can downgrade to a lesser house mortgage free.

[superkartracer]

anonymous said:

[redacted]

WOW!

[Welshbeef]

Tonker - he said he bought 10 years ago now average house prices back then were c£70k so lets say he has a mortgage for that much and at 4.5%SVR IO so thats £262.5pcm.

That might indicate that the families joint net income is £1875pcm = £22.5k Net or £28k ish Gross.

Am I ball park???
Clearly if he bought in Chelsea its much more, but if its Newcastle then other end of the spectrum.

[Pugsey]

Ozzie Osmond said:

I always thought "interest only" mortgages were principally for the buy-to-let market? Most owner-occupiers would be wanting to buy the house, albeit over 25 years.

Or have you got a carefully considered bet on? Namely that inflation will erode the mortgage over time. With inflation now down almost at zero that might take a while....

Which particualar cave have you been in for the last ten years? Have you not heard of endowment mortages - and the hoo hah surrounding them?? A while back interest only endowment mortages were considered by some (IFAs mainly) to be THE mortgage of choice. OH DEAR.

Edited by Pugsey on Monday 12th January 15:47

[thinfourth2]

[smugmode]

0% here

[/smugmode}

[NoelWatson]

Welshbeef said:

croyde said:

Ozzie Osmond said:

I always thought "interest only" mortgages were principally for the buy-to-let market? Most owner-occupiers would be wanting to buy the house, albeit over 25 years.

Or have you got a carefully considered bet on? Namely that inflation will erode the mortgage over time. With inflation now down almost at zero that might take a while....

If the mortgage is now only 14% of your outgoings it might be worth having a think about the whole situation to see if there's something more suitable for you. PH isn't the place to get that sort of specific personal advice though.

Good luck!

Cheers.

Initially it was interest only as we had planned to move on within 5/6 years but 10 years later we are still here and yes it does worry me that in 15 years time the bank will want its money back.

Obviously the house will be worth so much that it will have been sold at a massive profit and a cottage by the sea will have been bought for cash and the mortgage paid off.

Errrrrrrr! Here's hoping.

Oh I didnt realise you'd been IO for that duration....
Generally if your buying a residential house the reason for going interest only is a short term measure (in the main) where by the first year or 2 you need extra cash for white goods, beds, sofas etc, if its your 2nd place you'd already have most of this stuff so wouldnt consider it.

Or your fully stretching yourself & there is a granite guarentee that you have a payrise coming and as such can then up to repayment.

OR you have what you would have paid on the repayment paid into an alternative investment with the hope that over the life of the mortgage it will be equal or higher than the outstanding debt.

OR your planning that in 25 years time that the house price inflation will have erroded the debt meaning that when you sell in 25 years you can downgrade to a lesser house mortgage free.

Or it is more efficient from a tax point of view to leave money in company.

[Welshbeef]

Endowments - NOW could be a good time or do part repayment part endowment. So effectively buy unit trusts when Equity is low and pay off capital when equity is high.

Guess you could do that with a fully flexable mortgage IO.


I guess these days the "One account"/offset account is by far the best option, then again the interest your earning is tiny...

[Soir]

our repayment mortgage is 30% of net income (joint income, would be 55% if single) 12yrs left, but this is all relative to age/length of mortgage left etc..

[Altrezia]

60%ish here.

Was much less, but we've now had a babe, and I don't want my wife to go back to work (I don't like washing up).

[Welshbeef]

Altrezia said:

60%ish here.

Was much less, but we've now had a babe, and I don't want my wife to go back to work (I don't like washing up).

Ouch. Thats scary.

Bit of advice here - hope your on repayment? - secondly DO NOT OVERPAY YOUR MORTGAGE THIS YEAR OR NEXT YEAR. I'd normally recommend it but now its too risky basically if you overpay your mortgage & its not a flexable mortgage you cannot tell the bank that overpayment can be used instead of taking any further payments from my bank account as Im now out of work.

So keep a buffer.

[croyde]

anonymous said:

[redacted]

[NoelWatson]

croyde said:

The young amongst you will not believe that and lets hope it does not get that bad again.

It will be much worse

[Altrezia]

Welshbeef said:

Altrezia said:

60%ish here.

Was much less, but we've now had a babe, and I don't want my wife to go back to work (I don't like washing up).

Ouch. Thats scary.

Bit of advice here - hope your on repayment? - secondly DO NOT OVERPAY YOUR MORTGAGE THIS YEAR OR NEXT YEAR. I'd normally recommend it but now its too risky basically if you overpay your mortgage & its not a flexable mortgage you cannot tell the bank that overpayment can be used instead of taking any further payments from my bank account as Im now out of work.

So keep a buffer.

I'm alright with it.

[croyde]

NoelWatson said:

croyde said:

The young amongst you will not believe that and lets hope it does not get that bad again.

It will be much worse

It amazes me that anyone is buying knowing that the property price will still have a long way to fall, if your prediction is correct.

They have just finished an apartment block around the corner and the cheapest 2 bedroom is £379,000 rising to over £700,000 for the ones with a better view. I had a chat with the salespeople and the reckoned that 80% were already sold and when you walk past you can see that people are already living there.

Madness.