Soldato
Plus i'm fairly sure the average salary is closer to £28k than £25k Which when doubled for couples and x4 salary gives another £25k for a mortgage.
How far do you push yourself when you buy property?
- Thread starter Participant
- Start date
Soldato
I think it’s perfectly reasonable to continue to move up the property ladder as long as the finances stack up. It doesn’t need to be a forever home or your dream home necessarily as who can predict the future but to see it as an investment also for childre/retirement. I would ensure that you have other financial security also. A common benchmark would be 6 months household salary in readily accessible current accounts that would remain untouched ideally if upgrading. I would be careful and cautious not to get drawn into the trap of seeing it as your picture perfect family home and blinkering you into stretching too far.
We bought our house were aiming for a mortgage of about this which gave us plenty of headroom. In the end we spent about a year searching and needed only to borrow very small amount from the bank of mum and dad! Joys of being up North. If and when we move to a bigger house we may push to about 30-40% of monthly household income.
We bought our house were aiming for a mortgage of about this which gave us plenty of headroom. In the end we spent about a year searching and needed only to borrow very small amount from the bank of mum and dad! Joys of being up North. If and when we move to a bigger house we may push to about 30-40% of monthly household income.
Last edited:
Soldato
That pretty good going. Those ages are aren’t late at all. There’s no right or wrong way. Perhaps your friends weren’t able to afford bigger properties? I know a few of my friends went the same way and bought their first home seeing it as their forever homes but who knows what the future holds. Bigger mortgage also means paying a whole load more of interest back to the bank.
Soldato
- Joined
- 19 Oct 2008
- Posts
- 5,954
I'll just say don't scacrfice enjoyment or hobbies to buy a house.
People over here over pay for properties and are infatuated with the property ladder. That kind of included me for a time
. Until a few years ago I had three (one I live in, two that I once lived in but let them instead of selling). Sold one, tried to sell another but for now it's let out again.
Have to consider Brexit or other risks taking a wrecking ball to your income too.
I have friends in Germany who have no interest in owning their own property. They all earn good money too and not young 38-50. Strange how over here it's a must have, partly I think due to high rental costs.
Each to their own. I've of the opinion that I don't want too much money tied up in a property, I'd rather enjoy the cash rather than paying a debt for eternity.
I've been quite conservative with mortgages, borrowing way less than I could have and paying them down or off asap.
Havign said the above, there's a lot to be said for buying a house that will last you a lifetime. Buying and selling every few years stops the boredom in some peoples lives but is very costly financially.
People over here over pay for properties and are infatuated with the property ladder. That kind of included me for a time
. Until a few years ago I had three (one I live in, two that I once lived in but let them instead of selling). Sold one, tried to sell another but for now it's let out again.Have to consider Brexit or other risks taking a wrecking ball to your income too.
I have friends in Germany who have no interest in owning their own property. They all earn good money too and not young 38-50. Strange how over here it's a must have, partly I think due to high rental costs.
Each to their own. I've of the opinion that I don't want too much money tied up in a property, I'd rather enjoy the cash rather than paying a debt for eternity.
I've been quite conservative with mortgages, borrowing way less than I could have and paying them down or off asap.
Havign said the above, there's a lot to be said for buying a house that will last you a lifetime. Buying and selling every few years stops the boredom in some peoples lives but is very costly financially.
Last edited:
Not at all really. Our first house we could probably have afforded about another 20% but didn't really want to over-extend ourselves at that stage and I had a poor wage. Our current house we could have afforded about another 30%, but at the time (2008) house prices were falling so it seemed quite a risk (also didn't want to change our mortgage as we had an excellent rate). There are occasions I regret it as it is a new build estate with the houses we could have bought literally across the road from us. Affordability has gone up over the years as you suggest (I earn 3x what I did when we bought the house) but non-housing related expenditure (kids) has gone up too. If we bought a new house we'd probably be looking at up to double the value of our current home, but I wouldn't be comfortable going above that.
When window-shopping for houses over the past few years again our max budget has been around 30% higher than the houses I looked at. I've posted about this on here before but pretty much all my purchases are value-driven i.e. I very rarely buy best of breed and am always looking for something almost as good for significantly less money. So in this context you are talking about say a 4 bed house in a decent area rather than a 5 bed house in a great area.
I wouldn't rule out ever pushing the envelope a bit (within reason) but I would be wanting something absolutely top notch to convince me it is worth spending hundreds of thousands extra. And most properties fitting that category are out of reach anyway unless we finally get a proper recession / property crash (something a lot more impactful than 2008).
When window-shopping for houses over the past few years again our max budget has been around 30% higher than the houses I looked at. I've posted about this on here before but pretty much all my purchases are value-driven i.e. I very rarely buy best of breed and am always looking for something almost as good for significantly less money. So in this context you are talking about say a 4 bed house in a decent area rather than a 5 bed house in a great area.
I wouldn't rule out ever pushing the envelope a bit (within reason) but I would be wanting something absolutely top notch to convince me it is worth spending hundreds of thousands extra. And most properties fitting that category are out of reach anyway unless we finally get a proper recession / property crash (something a lot more impactful than 2008).
I know it is just a rule of thumb but I'd be a bit wary of such rules, as it means the higher the salary the more buffer you need, which is somewhat counter-intuitive. An unemployed person could spend all their money on property (and then be unable to release the capital due to not being able to get a mortgage) and still meet the criteria. I think 6 months living expenses is a better benchmark
Interesting thoughts. I'm stuck between staying comfortable with plenty of disposable income, vs. accepting some sort term pain for our dream family home and investing in my children's inheritance.
I would say I hear more people talk of regret at not upsizing when they could, than regret at doing so.
The interesting thing is that I could afford to borrow a lot more than bank websites are saying they'd lend me. I don't know if they're super cautious with their online calculators (under promise / over deliver approach), but I could swallow hundreds more in monthly payments than they appear willing to lend me, though most do say to call them for a more detailed conversation.
I would say I hear more people talk of regret at not upsizing when they could, than regret at doing so.
The interesting thing is that I could afford to borrow a lot more than bank websites are saying they'd lend me. I don't know if they're super cautious with their online calculators (under promise / over deliver approach), but I could swallow hundreds more in monthly payments than they appear willing to lend me, though most do say to call them for a more detailed conversation.
Soldato
It's changing in Germany and people are starting to buy more - it was more to do with how difficult it was to buy a property there than anything (I bought flat in Munich in 2003 and jeeeez). I don't see investing money into a property as being 'tied up', if I ever wanted to move again I'd either sell or rent out the current place and at least I'm not throwing money into a rental black hole as I did for 10 years.
^^I would expect most lenders to be cautious for several reasons:
-Just because you can afford more today, doesn't mean to say you can afford more in future. Lending to the max of someone's true affordability would be very risky because it has no contingency
-People frequently underestimate their spending because they either ignore small attritional purchases (very few people sit down and say, oh in two years time I'm going to buy something that's on rainforest lightning deals) or do not budget for larger adhoc spending like house/car maintenance
-They have to profile borrowers at an aggregate level (no doubt with some lower-level adjustments based on credit rating and such) so typical spending/risk profile for your demographic may be higher than yours
Clearly there will be some niche lenders who have a different business model and want to attract business by lending more (and probably charging more for the privilege), so you might find a Broker who could unlock such offerings.
As for people regretting not upsizing it's kind of easy to say that because they won't have actually had to feel the pain of the debt; it is easy to look at a swanky pad and go 'yeah look at that lifestyle $$$' but much harder to visualise what it's like when you've got children asking why they are eating beans on toast for the fifth day running and aren't allowed to go on the school trip like their friends are. It is natural human behaviour that if you ask someone "do you wish you bought a better house?" they would say yes but a bit harder to openly admit struggles their financial recklessness may have imposed on their families.
I guess I fall somewhere in the middle in that I partly regret not buying a bigger house but equally I don't really regret the decision making process i.e. I think I would probably make a similar choice if faced with the same situation again.
-Just because you can afford more today, doesn't mean to say you can afford more in future. Lending to the max of someone's true affordability would be very risky because it has no contingency
-People frequently underestimate their spending because they either ignore small attritional purchases (very few people sit down and say, oh in two years time I'm going to buy something that's on rainforest lightning deals) or do not budget for larger adhoc spending like house/car maintenance
-They have to profile borrowers at an aggregate level (no doubt with some lower-level adjustments based on credit rating and such) so typical spending/risk profile for your demographic may be higher than yours
Clearly there will be some niche lenders who have a different business model and want to attract business by lending more (and probably charging more for the privilege), so you might find a Broker who could unlock such offerings.
As for people regretting not upsizing it's kind of easy to say that because they won't have actually had to feel the pain of the debt; it is easy to look at a swanky pad and go 'yeah look at that lifestyle $$$' but much harder to visualise what it's like when you've got children asking why they are eating beans on toast for the fifth day running and aren't allowed to go on the school trip like their friends are. It is natural human behaviour that if you ask someone "do you wish you bought a better house?" they would say yes but a bit harder to openly admit struggles their financial recklessness may have imposed on their families.
I guess I fall somewhere in the middle in that I partly regret not buying a bigger house but equally I don't really regret the decision making process i.e. I think I would probably make a similar choice if faced with the same situation again.
Associate
The quicker you can pay the mortgage the better, don't make it bigger, consentrate on making it smaller.
We was all crammed in as a family back in the day and we survived ok
We was all crammed in as a family back in the day and we survived ok
The £22K figure is for all employess which includes part timers, £27K is the average median wage for full-time employees.
Soldato
I guess it depends on your age, and how much disposable income you'd have if/when rates start to rise, and off the back of that how much you expect your income to increase year over year. I'd also be looking at the negative impact if you are having to possibly sacrifice putting more away towards a pension, vs. the value of the property.
As you said, there are many, many variables and it's pretty much impossible to know if you made the right or wrong choice as sadly we cannot predict the future. I know that on of my friends has only just gone back into positive equity after buying at the height of the housing market before the 2008 financial crash, and has been forced to stay in the property for a lot longer than originally anticipated, and as a result the family quickly outgrew the house, and ruined their plans regardless of the disposable income.
Caporegime
- Joined
- 21 Jun 2006
- Posts
- 38,366
Exactly.
You could easily afford a house then be told oh you are moving office at work now you will need a car to travel there. Now you need to fork out £800 a month for car (cost of car, insurance, servicing, maintenance, MOT's, tyres and fuel). Leaving you in a position where you can no longer afford anything else apart from the home and car.
Caporegime
- Joined
- 21 Jun 2006
- Posts
- 38,366
so that would be £120K max for 1 person or £240K max for 2 persons. so would dictate the average house price of a first time buyer to be around £180K then.
but take into account if 1 is part time or possibly going to be going on maternity, etc. then £150-£160K is still probably the right sort of figures unless they are pushing themselves to the limit.
also it's about finding a balance. no point working for 30+ years just to pay for a home and nothing else. i would never recommend borrowing anywhere near the absolute maximum for that reason. unless you have assurances in place your wage will substantially increase with time.
also i don't think living in the 1 home forever is ideal either. i would rather buy somewhere that is say 10-20 years old and live there for 10 years then move on. you will then never have to fork out for say a new roof and it gives you 10 years to move up to the next rung on the ladder.
my preference is a second hand new build. rather than a direct new build as they tend to be overpriced IMO. everyone who bought a new build in the estate next to mine lost money on them (high end) whereas it's the low to mid end ones which have done well.
the more money you have the more you can get but also you need to make sure you buy at a good price. i know some that have lost up to £150K and will never see it back because they grossly overpaid on a new build. my area is unique in that respect. they were charging top end prices but it's not an affluent area but more of a new area that is up and coming and will likely in 30 years time be very sought after because the location is close to city centre and it doesn't have any bad areas too nearby it. they were charging top dollar to the first buyers though.
Let’s look at the maths:
2 x £27k earnings which is £1811 per month each.
Put that together and 35% of your combined take home earnings is £1267 a month for your mortgage
Let’s add s few more things on top (averages)
Council tax £130
Water £35
Electricity £45
Gas £40
Broadband “package” £60
TV licence £12
Work travel £125 each
Food £800
Total - £2639
£491 left per month each
That’s before any cars, children, holidays, going out, presents, a roof leak etc.
That’s why you shouldn’t stretch yourself over 35% mortgage on an average salary.
If you’re both earning 50K that’s a different story but way to many people push themselves beyond a reasonable limit.
£1267 a month would but you a 5 bed detached house in Greater Manchester.
2 x £27k earnings which is £1811 per month each.
Put that together and 35% of your combined take home earnings is £1267 a month for your mortgage
Let’s add s few more things on top (averages)
Council tax £130
Water £35
Electricity £45
Gas £40
Broadband “package” £60
TV licence £12
Work travel £125 each
Food £800
Total - £2639
£491 left per month each
That’s before any cars, children, holidays, going out, presents, a roof leak etc.
That’s why you shouldn’t stretch yourself over 35% mortgage on an average salary.
If you’re both earning 50K that’s a different story but way to many people push themselves beyond a reasonable limit.
£1267 a month would but you a 5 bed detached house in Greater Manchester.
Soldato
For 2 people surely that food bill can be halved to £400/month. Makes your 35% max seem quite achievable.
Im going to go for probably 40% next house, if she/I didn't want kids, I would consider 50%+ (would probably have to if I was south of Birmingham
)
We've been looking at places like Binton, Norton Lindsey, Wolverton, Henley, Claverdon, Wooton Wawen, Aston Cantlow. Basically anything detached with land is north of £700k.Im going to go for probably 40% next house, if she/I didn't want kids, I would consider 50%+ (would probably have to if I was south of Birmingham
)
South Warwickshire seems to have gone crazy recently. **** broadband in most of these places too, but oh so pleasant and free of riff raff :0
Soldato
Anything around S on A is lol money now, I live in the area.You would get so much more for your cash if you moved a few miles north.
I've ended up with 2 houses kind of by accident.
Currently I rent out one and the rent from that covers the interest payments and the entire mortgage on the house i live in. Both properties are combined mortgaged to 3x my salary. But then I am risk averse having been made redundant a few times.
Currently I rent out one and the rent from that covers the interest payments and the entire mortgage on the house i live in. Both properties are combined mortgaged to 3x my salary. But then I am risk averse having been made redundant a few times.
Soldato
- Joined
- 19 Oct 2008
- Posts
- 5,954
I think that's quite low risk and pretty sensible. Even with no tenant both houses only cost you 3x salary which is rare these days. Many are probably over 5x on a single house.
Very true. One mentioned that rents are getting expensive where they live (Oldenburg) so the thought of buying is crossign their mind. They've lived in the flat for 12 years or so and know they'll have to pay more rent if/when they move.
Depends on how much people borrowed and value of house regarding money being tied up. I'm lucky to have paid off the mortgage on my main property so don't have my earnings tied up paying that but as I live alone at the moment I do think "Why do I have x amount tied up in this house?". That's why people later down size of course.