Cost of Mortgage Advice

[jonnylaris]

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.

 

[jonnylaris]

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!

 

[jonnylaris]

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!

 

[jonnylaris]

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]

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.

 

[jonnylaris]

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

 

[jonnylaris]

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

 

[jonnylaris]

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%?

Great advice mate thanks for the detailed response! We are both quite fortunate as we both work in jobs we love in the IT industry (web development). It's a great industry to be in as there are no shortage of jobs and the pay is good. Infact we are still at the bottom bracket salary wise, so within the next few years we should be on a considerably higher income all being well.

 

[jonnylaris]

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.

Is there much point adding on income protection too?

 

[jonnylaris]

Only you can answer that question.

My opinion (although it's kind of a fact) is that insurance companies need to make money, so the amount you will pay will exceed the likely benefit. However, as with any insurance, if you need to make a claim (and they pay out), then of course, you'll be glad you took it!

My wife and I have enough savings that we can live without any income for a couple of years, so we don't bother with things like income protection insurance. I'd rather save the money we'd pay for extra insurance into productive assets.

Yep, we could easily stick 3-4 months wages away into an ISA or something as an emergency fund instead.

 

[jonnylaris]

I was a bit shocked how much we could get a mortgage for as well. We ended up with a 250k house with the view of spending 30k on it (all priced by using equity from a sale). But we could have lent for a 370k house! Technically we could have afforded it but we would just be sat in an empty house not being able to afford to do anything.

Yea exactly, we could borrow some crazy amount too.

Basically our mortgage payment would be £1k which will leave us with over £3k a month.

Even if one of us loses our job and we run out of income protection, 1 of us can still pay the mortage and bills and have enough for food and essential items.

 

[jonnylaris]

I would like to hear what % of net monthly salary people are paying on their mortgage including rates. That would be interesting.