Cost of Mortgage Advice

jonnylaris · 22 Jun 2020 at 10:35

Me and my partner earn £35k each and we are looking to borrow around £230-240k on a house (£270k house with 10-15% deposit).

A 2% deal over 30 years would work out at around £850 a month and with rates the total monthly spend would be around the £1k mark (insurance for both of us around £60 each on top).

So to put it into perspective, the total bill for everything would be around 25% of our total income after tax.

Is this reasonable, are we spending too much or do these figures sound ok?

To give a bit of background, we don't fritter away money on a regular basis on going out or fancy holidays, we save quite a bit of money each month and are never in debt etc. Also we are both due a raise in September so we could easily be earning 5k more each in a few months.

PiKe · 22 Jun 2020 at 10:40

That sounds more than reasonable.

Semple · 22 Jun 2020 at 10:51

As above, sounds well within your limits. In fact, you'll have quite a bit left over, i'd suggest overpaying.

jonnylaris · 22 Jun 2020 at 10:54

Semple said:
As above, sounds well within your limits. In fact, you'll have quite a bit left over, i'd suggest overpaying.

It's good to hear others backing us up because some people who we have talked to think we are crazy for spending that amount on a house. I guess some people have a different mindset when it comes to money!

fobose · 22 Jun 2020 at 11:10

Me and my wife earn about the same and we pay £1250 a month (recently started over paying to £1500). Our mortgage was 280k in 2018.

jonnylaris · 22 Jun 2020 at 11:11

fobose said:
Me and my wife earn about the same and we pay £1250 a month (recently started over paying to £1500). Our mortgage was 280k in 2018.

Good to know, thanks!

BUDFORCE · 22 Jun 2020 at 12:06

I doubt you'll have any issues getting a mortgage.

Peerzy · 22 Jun 2020 at 12:12

Seems completely sensible, the insurance seems fairly expensive but it will depend on what cover you have gone for - maybe search around for this and see if another product suits your requirements and is cheaper.

FWIW we pay £16 a month for 2 people, death only, £250k payout. I think adding critical illness pushed it up to around £50 for both per month. Taking out the policy directly with the provider (rather than through my mortgage broker) also got us a £100 gift card at the time.

fobose · 22 Jun 2020 at 12:18

I forgot to mention our insurance. Yours cost does look high.

We have our mortgage cost covered only (£1250) for income protection and that costs us £14 a month between us (I get 8 weeks sick pay, my wife gets 6 months - which is taken in to account in the costs normally). We also pay another £14 a month between us for life insurance. Our mortgage broker quoted us for both insurances and they are with Aviva. Quite handy for me as I have my pension with Aviva so when I log in I can see all our details etc.

jonnylaris · 22 Jun 2020 at 13:08

Our mortgage advisor has us on the top tier insurance package which includes income protection, critical injury cover and life insurance which is probably why it's so expensive. I might ask him to have another look at it as I do think it's a lot of money to be paying each month.

jonnylaris · 22 Jun 2020 at 13:08

BUDFORCE said:
I doubt you'll have any issues getting a mortgage.

We already have a mortage offer, our mortgage advisor said we could theoretically borrow up to 320k but I just wanted to check if the numbers were sensible.

Mercenary Keyboard Warrior · 22 Jun 2020 at 13:44

jonnylaris said:
Our mortgage advisor has us on the top tier insurance package which includes income protection, critical injury cover and life insurance which is probably why it's so expensive. I might ask him to have another look at it as I do think it's a lot of money to be paying each month.

Tell him what you want to cover, he will get commission so will likely recommend high cover

Scuzi · 22 Jun 2020 at 13:53

jonnylaris said:
Our mortgage advisor has us on the top tier insurance package which includes income protection, critical injury cover and life insurance which is probably why it's so expensive. I might ask him to have another look at it as I do think it's a lot of money to be paying each month.

Any time a mortgage advisor has given me an insurance quote it has been astronomical when compared to what I got when shopping around. I’m talking in the realms of double or more.

Seek your own quotes. You might be surprised.

Psycho Sonny · 22 Jun 2020 at 13:58

jonnylaris said:
It's good to hear others backing us up because some people who we have talked to think we are crazy for spending that amount on a house. I guess some people have a different mindset when it comes to money!

how many of them have a household income of £70K though?

plus £270K isn't a crazy amount by any means. I'd say it's average.

As for your own circumstances. I'd say a mortgage of £280K would still be sensible so £240K is extremely manageable. You should be able to go for a 20 year deal with your income or go longer and overpay for greater flexibility. It's when you move into the £280K-£350K mark with your income i'd say you were walking on eggshells.

I take you are both in long term stable jobs? That is really where the only worry is. The amount vs your income is very very sensible. The people you talked to must be idiots.

jonnylaris · 22 Jun 2020 at 14:05

Thanks for the feedback folks really appreciate it. I'm defo going to look at reducing the insurance premiums that's for sure!

MikeTheNative · 22 Jun 2020 at 14:19

Are houses that cheap in belfast for 280k to be crazy money?

As for affordability I think you have left yourselves with decent enough headroom.

jonnylaris · 22 Jun 2020 at 14:33

MikeTheNative said:
Are houses that cheap in belfast for 280k to be crazy money?

As for affordability I think you have left yourselves with decent enough headroom.

Well yea the houses are a bit cheaper over here but it's hard to find a decent 4 bed detached house in a good area for under 250 unless you go way out into the country.

Just to give you an idea this is a house we are potentially looking at:

https://www.propertypal.com/2-briar-court-old-carrick-road-newtownabbey/591379

Jimbo Mahoney · 22 Jun 2020 at 14:56

Hey Jonny - fellow "Belfastian" here!

My wife and I bought our first house 2 years ago - a small, 3 bed detached in North Belfast. I was insistent that we buy detached - I do not want to end up with nightmare neighbours! She was tempted with semis because of course you get more for your money!

The house was £158k and, at the time, I was on £40k and my wife £25k.

We put down a 25% deposit and got a 5 year fix @ 2.08%.

Repayments are £500 per month, plus £70 rates plus £38 for life and buildings & contents insurance (£23 for life cover and £180 per year for buildings and contents), so a total of £600 a month.

At the time, that was 15% of our take-home.

However, we deliberately went with a high deposit and low total to allow for contingencies.

A year or so ago, I quit my job (stress) without a job lined up, which was quite exciting. I was unemployed for about 3 months before finding a new job that is basically zero stress, but only pays £25k.

My wife has quit her job twice (fed up in one and bullied in another) and is currently not working. (We're idealists in that we hate working for money and prefer jobs that are enjoyable / worthwhile / not stressful).

This (small mortgage) allows us the freedom to do things like this. Currently, I can handle all the bills on my modest salary while she looks for meaningful work.

My opinion is that you are at your financial limit with that house, but as you can see, I prioritise freedom over a nice house.

My advice would be consider if you'd be happy with the mortgage if rates were to go to 5% and also how secure / happy your jobs are. Would you be able to pay the mortgage on one salary with rates @ 5%?

HungryHippos · 22 Jun 2020 at 14:57

jonnylaris said:
Well yea the houses are a bit cheaper over here but it's hard to find a decent 4 bed detached house in a good area for under 250 unless you go way out into the country.

Just to give you an idea this is a house we are potentially looking at:

https://www.propertypal.com/2-briar-court-old-carrick-road-newtownabbey/591379

Looks nice size wise but I hate their decor choices!

Regards your payments, seem sensible to me. As others have said the insurance looks quite high but if you want all singing/all dancing it will cost more. Depends on your appetite for risk I suppose. Some of them don't pay out forever either, for example critical illness will probably only pay out for a certain period of time.

You can reduce how much cover you get to lower figures and play about with things to find a decent balance. For example if going for the one that pays if you lose job, then you don't always need full pay when half pay will tide you over for a bit, cost of the policy should scale with the payout options.

I echo what others said though, should make your own insurance enquiries because my broken wanted to charge me and arm and a leg as they get commission, should be cheaper through comparison sites.

Also don't forget if you are buying a larger house like this, it might normally also mean you don't need to upsize in the future, so you might save some money there down the road by avoiding having to move too often.

Jimbo Mahoney · 22 Jun 2020 at 15:04

Re: Insurance - I echo what Hungry and others have said.

Our broker initially wanted to flog us ~£100 a month for life / critical illness cover.

As you can probably tell from my previous post, this didn't sit well with me (especially as their commission is on the forms they give you!).

In the end we went for our own (search engine) decreasing life cover to the value of the mortgage and a small amount of critical illness cover, which is much more reasonable @ £23 per month.