The salary question?

[HangTime]

I'm more interested in what people's expendable income is after all bills? It would be interesting to see the differences between:

£25k
£50k
£100k

These sort of threads come up periodically, at the end of the day it's all massively variable, someone might be ploughing £30k a year into a pension so their 'expendable' income is lower than someone with a lower salary, but that's a choice they've made, and in future they can potentially draw down on that investment.
People have different mortgage terms for example, the last time I remortgaged we took a 7 year term, had we taken say a 25 year term then before we paid it off we'd have more 'expendable' income each month due lower monthly repayments but that would be a bit of a fallacy as it ignores the fact that we reached a point where the mortgage was paid off and suddenly in the future bills drop drastically and 'expendable' income shoots up.
I guess what I'm saying is, such comparisons between people are never like-for-like and whilst it might pique a bit of curiousity ultimately a headline number of "I have £xxxx left after bills" doesn't really mean much against someone saying "I have £xxx left after bills", the person with £xxx left after bills might be better off overall.

 

[Greebo]

These sort of threads come up periodically, at the end of the day it's all massively variable, someone might be ploughing £30k a year into a pension so their 'expendable' income is lower than someone with a lower salary, but that's a choice they've made, and in future they can potentially draw down on that investment.
People have different mortgage terms for example, the last time I remortgaged we took a 7 year term, had we taken say a 25 year term then before we paid it off we'd have more 'expendable' income each month due lower monthly repayments but that would be a bit of a fallacy as it ignores the fact that we reached a point where the mortgage was paid off and suddenly in the future bills drop drastically and 'expendable' income shoots up.
I guess what I'm saying is, such comparisons between people are never like-for-like and whilst it might pique a bit of curiousity ultimately a headline number of "I have £xxxx left after bills" doesn't really mean much against someone saying "I have £xxx left after bills", the person with £xxx left after bills might be better off overall.

Agreed. Too many variables. In 3 years time we are mortgage free and my disposable income will jump up massively.

 

[theone8181]

I remember writing about this a couple of years back, basically around the drawbacks of using bedroom count as a proxy for house size, how annoying it is to not be able to search by square meterage listed (endless having to click through to floorplans and hope it's on there) and the fact that typical house designs don't really suit modern living or at least my requirements for modern living. Essentially the sort of house I want needs at least 100m^2 ground floor space but I don't need 100m^2 of upstairs space. I only really *need* 3 bedrooms but the majority of 3 bed houses are too small because they often lack general living space. As much as I hate to say it, something like a chalet bungalow might be the sort of property that would suit me, with upstairs being solely bedroom space and using the ground floor for general living. Alternatively a property that's had a ground-floor extension but aside from conservatories I think they may be less efficient(?), I think a lot of people try to extend on multiple floors to get more bang for buck.

I agree, we are currently having our 2nd extension done which will take overall space to around 120 sq metres which is quite reasonable for a 3 bed detached. One of the guys I work with has a 4 bed that's smaller (but strangely worth more and it's not s better area). I refuse to include garage space as actual room though.

 

[danlightbulb]

I remember writing about this a couple of years back, basically around the drawbacks of using bedroom count as a proxy for house size, how annoying it is to not be able to search by square meterage listed (endless having to click through to floorplans and hope it's on there) and the fact that typical house designs don't really suit modern living or at least my requirements for modern living. Essentially the sort of house I want needs at least 100m^2 ground floor space but I don't need 100m^2 of upstairs space. I only really *need* 3 bedrooms but the majority of 3 bed houses are too small because they often lack general living space. As much as I hate to say it, something like a chalet bungalow might be the sort of property that would suit me, with upstairs being solely bedroom space and using the ground floor for general living. Alternatively a property that's had a ground-floor extension but aside from conservatories I think they may be less efficient(?), I think a lot of people try to extend on multiple floors to get more bang for buck.

Yes its actually becoming a major issue for me as I'm currently househunting. The choice out there is awful. Like you, I could do with finding something that has been extended downstairs, few and far between though and when they do come up, they look to be quite shoddy builds/flat felt roofs which puts me off.

The problem with housing as a single person is that to some extent you feel you should future proof it. If houses were more plentiful and liquid assets, then you could have a 1 bed and upgrade it when you needed to. But houses aren't plentiful nor liquid, so it forces you into something that you don't really need now because of the cost and hassle of finding something later.

Like you, I would be more suited to the houses they have in America or Australian suburbs. Big single storey houses and you can essentially configure them how you want. Our way of housing in this country is pretty crap really.

 

[krooton]

Mortgage, insurance, bills and food (including pet costs): £2,400
Debts (including car finance): £2,400

Not much in the way of disposable income in our household.

 

[IGBT]

Hi everyone. This post caught my attention because we are currently house hunting and we have seen one that we like a lot and we've made an offer that will be accepted in principle.
Now we are having second thoughts and re-viewing everything again. The reason being is simple because of this:

1. Covid
2. Brexit
3. Slow recovery of the economy

For those of you whom have purchased a house recently or are in the process of buying one or even thinking about it, did you pondered these 3 factors? In addition to this, after talking to the financial adviser we understood that lender are now charging more interest rates than say 2 months ago (literally 2 months ago!). If you go with 2y, 30y put 15% the interest rates are lower. If you go with 2y and 30y but 10% they increase almost 1%. That's crazy. The adviser said that all this is due to covid which is understandable. Some people opinion that I know say that a financial crises is underway which got us thinking.

Any opinion is welcome TiA

 

[EvilRob]

These sort of threads come up periodically, at the end of the day it's all massively variable, someone might be ploughing £30k a year into a pension so their 'expendable' income is lower than someone with a lower salary, but that's a choice they've made, and in future they can potentially draw down on that investment.
People have different mortgage terms for example, the last time I remortgaged we took a 7 year term, had we taken say a 25 year term then before we paid it off we'd have more 'expendable' income each month due lower monthly repayments but that would be a bit of a fallacy as it ignores the fact that we reached a point where the mortgage was paid off and suddenly in the future bills drop drastically and 'expendable' income shoots up.
I guess what I'm saying is, such comparisons between people are never like-for-like and whilst it might pique a bit of curiousity ultimately a headline number of "I have £xxxx left after bills" doesn't really mean much against someone saying "I have £xxx left after bills", the person with £xxx left after bills might be better off overall.

One of the most sensible posts I've read in a while. It's difficult to think of a good measure that compares apples to apples.

• Disposable income - addressed in HangTime's post
• Salary - doesn't take into account wealth from other sources or debts
• Net worth - too much variation in house prices/cost of living regionally

 

[inferno]

I have many friends who are making really good money but they waste it on a lot of junk. If you look at their assets compared to their salary they are not doing great. Having a high salary doesn't necessarily equate to wealth, even though it should.

 

[Greebo]

I have many friends who are making really good money but they waste it on a lot of junk. If you look at their assets compared to their salary they are not doing great. Having a high salary doesn't necessarily equate to wealth, even though it should.

indeed. My partner has always been into horses and she has had lots most of her life. She currently has 5. Having horses is expensive. I eonce joked with her that the annual cost of those five horses was more than our mortgage cost. So yeah easy to earn good money but then spend it all

 

[happy_2008]

I remember one of my flat mates in london was earning good money around 50k a year at a guess. However, she pretty much spent every penny of her salary each month and every time she went out on a saturday, she would spend £200 on a dress.

 

[sadat]

This is the question I ask myself every time I start a new pc build and then ultimate decide to water cool it. It a good thing I'm single and at this rate probably will be for a long time!

 

[Skeptic]

Hi everyone. This post caught my attention because we are currently house hunting and we have seen one that we like a lot and we've made an offer that will be accepted in principle.
Now we are having second thoughts and re-viewing everything again. The reason being is simple because of this:

1. Covid
2. Brexit
3. Slow recovery of the economy

For those of you whom have purchased a house recently or are in the process of buying one or even thinking about it, did you pondered these 3 factors? In addition to this, after talking to the financial adviser we understood that lender are now charging more interest rates than say 2 months ago (literally 2 months ago!). If you go with 2y, 30y put 15% the interest rates are lower. If you go with 2y and 30y but 10% they increase almost 1%. That's crazy. The adviser said that all this is due to covid which is understandable. Some people opinion that I know say that a financial crises is underway which got us thinking.

Any opinion is welcome TiA

There will always be something just around the corner. At the moment the risks appear to be greater than the reward, but that may not be the case at all when things play out. It seems that Brexit will be bad, but it may well not be. It seems that covid will be bad, but it may well not be.

I have just bought a new home, and considered the above. While I was a little uncomfortable with some macro events, I resolved that i couldn't predict the future so ought to stop trying.

Buying a home is not just a financial transaction, it's an emotional one. If you like the house, and want to make it your home, the rest will take care of itself one way or another.

I love the house I bought, and it will be a great family home. Whether it enhances my wealth is a secondary factor, and only matters if/when I sell. The world might be very different in 10 years time - and my thoughts, feelings and behaviours are likely to have less than zero impact.

 

[ultralaser]

There will always be something just around the corner. At the moment the risks appear to be greater than the reward, but that may not be the case at all when things play out. It seems that Brexit will be bad, but it may well not be. It seems that covid will be bad, but it may well not be.

I have just bought a new home, and considered the above. While I was a little uncomfortable with some macro events, I resolved that i couldn't predict the future so ought to stop trying.

Buying a home is not just a financial transaction, it's an emotional one. If you like the house, and want to make it your home, the rest will take care of itself one way or another.

I love the house I bought, and it will be a great family home. Whether it enhances my wealth is a secondary factor, and only matters if/when I sell. The world might be very different in 10 years time - and my thoughts, feelings and behaviours are likely to have less than zero impact.

I'd be very careful advising others to let heart rule the head on this. I bought just before lockdown and spent quite a while understanding the figures, I.e. what the impact of house price changes could have and my ability to cope with them. Lenders should do this but in reality propery stress testing applicants is really hard as we just don't know what the economic impact of C-19 + Brexit will be. I'll be open and honest and say if C-19 had been around just before I bought I'd have not completed and paused. That said even with Brexit it did have an effect on where, the type and what price point I bought at....

 

[happy_2008]

In addition to this, after talking to the financial adviser we understood that lender are now charging more interest rates than say 2 months ago (literally 2 months ago!). If you go with 2y, 30y put 15% the interest rates are lower. If you go with 2y and 30y but 10% they increase almost 1%. That's crazy.

This isn't really addition, the only reason the interest rate is almost 1% increase based on 10% deposit is purely down to your LTV being higher so this is reflected by the interest rates. Once your LTV drops below 75% the interest rates become quite low (Around 1.5%)

 

[Skeptic]

I'd be very careful advising others to let heart rule the head on this. I bought just before lockdown and spent quite a while understanding the figures, I.e. what the impact of house price changes could have and my ability to cope with them. Lenders should do this but in reality propery stress testing applicants is really hard as we just don't know what the economic impact of C-19 + Brexit will be. I'll be open and honest and say if C-19 had been around just before I bought I'd have not completed and paused. That said even with Brexit it did have an effect on where, the type and what price point I bought at....

I’m not advising anybody of anything. I’m saying that some decisions, while appearing purely financial, are often swayed by other factors - buying a house being one of them. If you base the buying of a house on what you think will be the future implications of it, you may strike lucky or you may not. Over the time-scale of a mortgage, literally anything can happen, and probably will.

This is a different question to affordability. Your ability to repay your debts is paramount!

 

[IGBT]

Thanks for your comments. Anyone's point of view is always welcome and might also help us figure out where we stand and that there people out there with the same thoughts.

Now that new figures in regards to the economy came out, our doubts have amplified. Read a couple of articles and have been paying attention to what the government is saying and things are not looking great to be honest.
The economy has shrunk 20% and it is likely to drop to 35% at the end of the year. Then brexit will come. Inflation will probably go up as well, could the BoE increase the interest rate?

They say house prices will likely drop 20% and that the economy will recover at the end of 2022 beginning of 2023 but it will be slow onwards. In addition to this again we have the brexit thing where any consequence of that will put to blame covid and not brexit itself. If w

The rational part is saying to stop and wait and the other one, the emotional one, is saying to carry on.

What we are currently thinking is basically:
1. If we end up buying the house what if in half a year or in one year time the properties value in the area goes down by 20%?
2. If we wait and prices come down, probably borrowing money will be more difficult for first time buyers. However if you can give put in a higher deposit, the interest rate at that time might not be too bad and all the obstacles that banks might put to first time buyers will be overcome by this. In this case by that time we will have a good deposit.
3. People say that if you are planning to live in the house for a long period of time (>5y which his the case) and you have your job secured probably it wouldn't matter and I agree and that was our reasoning. But now with these latest figures and forecasts, the economy is going to be hit pretty badly and I don't know if anyone can say nowadays and onward that their job is secured anymore. A scenario that was on the table was that is that even buying the house and something goes wrong in the near future (2 or 3 years) we could always sell the house. However by that time if the forecasts are correct the house prices will be down and if you need to sell the house you will likely lose money.
4.However if one waits for the so spoken crash on the house market, we can grab a more reasonable priced house (or more realistic to be honest because they are super overpriced) and if we need to sell it for whatever reason the house will be sold at around the same price point it was bought for not leaving us with negative equity.

Any comments are welcome and it is always good to hear other people's point of view.

Thanks in advance.

 

[Skeptic]

I fully understand your points and it's hard to disagree, in principle. However, what if "they" (i.e. forecasters) are wrong?

Your chain of events is predicated on their assumptions playing out as correct - what if the house prices rise 10%? Will you find yourself unable to purchase the property and/or wishing that you'd bought earlier?

I take my lead from my other investments, more so than purely with houses. The market is entirely unpredictable - take yesterday: news that the UK has the hardest/deepest recession in memory and the FTSE closes up 2%. Every prediction would have indicated otherwise, and every prediction would have been wrong.

All I'm saying is: there are no certainties. It's a bit like "timing" the market - you only know if it was a good time when you look back, trying to predict what comes next is a fool's errand and will - in the vast majority of instances - lead to poorer financial outcomes.

Good luck whatever you decide to do. I am in a similar position, and have resolved that I don't know what is going to happen, and that when I come to sell the house (if I ever do, life can make other plans!), the world might be fundamentally different to how it is today.

 

[Stu999]

@IGBT - you may as well wait 6 months at least. See what happens when the furlough scheme ends. Can’t imagine there will be much upward pressure on prices.

 

[IGBT]

Yeah, I could but the house we took a look at was really nice and even if it comes down nothing guarantees me that the banks at that time will be lending money for first time buyers at LTV 90%. It is not like we don't have the money for LTV of 80% but we would be left with very little. We are gong to go to there and have a second look.

 

[Guest2]

I'm on alright money now, touching on 50k with my average monthly overtime, so net ~£3k.
Total expenditure including mortgage and bills, £1350 so disposable income is £1650. But I choose to make a monthly mortgage overpayment and i'm paying back the bank of mum and dad (gift but I said I would re-pay them) This takes disposable income down to £650 a month.

Girlfriend pays for all food and restaurants, but no bills / mortgage yet. Though we usually burn through this in a couple of weeks if we go on a day session and to a restaurant or two

Some months (like this one) I totally blow disposible income on things like a new digital camera, or a couple of months ago a 2080Ti. Oops. I do sell on my old stuff to part fund new. Clothes I havent bought anything new for a while and don't have a car / motorbike to chew through money.