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How much out of myself and partner's combined salary of Net £3000 per month should go towards paying a Mortgage?

by sinali 02 October 2009 |

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We are fortunate enough to have parents who are willing to remortgage their house for capital gain, to enable us to build our own house.
My partner and i have a combined Net salary of £3000 per month. No debt, credit cards or overdraft.

We're borrowing £130,000 ona 14 year mortgage at a cost of around £850 to £950 a month, depending on which mortgage we take out.

Are we going to be paying too much on our mortgage per month? What is the average percentage people pay on their mortgage per month?

Any suggestions would be gratefully appreciated.

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414

manzanilla posted
As a very rough rule of thumb, housing costs should be 1/3 or less of your total income. That would be mortgage plus buildings insurance plus council tax. So you are just over the 'max' according to this rule.
But the rule matters less than your own circumstances. Obviously you guys are ok budgeters as you don't have any debts. What about starting a family - is that a target for the next few years? How will the mortgage feel then?
Have you sat down and tried to work out a monthly budget with the mortgage and other costs in there? There is a good template here: http://www.makesenseofcards.com/soacalc.html. Will one of you be miserable if you cant afford nice holidays and the other one feel that replacing th car every three years is much more important?
Why are you going for a 14 year mortgage? It seems like an odd length - is that until you retire?
When you say 'build your own house' does either of you have any experience of this? Have you got a good slug of contingency in the plans? Are you both going to be on the same wavelength whe it comes to deciding how much you can afford for the totally gorgeous bathroom tiles you have found? Extnsions and new kitchens have a habit of going ay over budget, so just imagine what a whole house could do...
manzanilla
Posted on 02 October 2009 | Love 0 loves Report
879

MikeGG1 posted
Snali
I would suggest 30% of gross income so that you are well inside that. However, what would be the situation if only one of you was able to work, for one reason or another? Could you manage if that happened?
Self-builds are a considerable test of your discipline in not going over budget as well as a test of your abilities.
Good luck.
Mike
Posted on 03 October 2009 | Love 0 loves Report
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sinali posted
Thanks for the response, I'm 25 and my brother is a builder and uncle's a property developer. 14 years as i want to be mortgage free before i'm 40. We have around 1/4 of the mortgage in savings to fall back on if things get tough. Our pensions have already been taken out of the Net salary.
If things do become too much for us and the monthly repayments are too great, IS there an option for us to raise more capital or extend our mortgage term a few years for less repayment?
Posted on 03 October 2009 | Love 0 loves Report
414

manzanilla posted
I think you should go for a mortgage which is 20 years but which allows you to overpay, then set off overpaying the amount that will give you your desired 14 year term. If life gets tough, you just reduce or end the overpayments. This way you get your aim if things go well and dont pick up extra stress / fees if they don't.
I was mortgage free by 40 and it's a great ambition!
manzanilla
Posted on 03 October 2009 | Love 0 loves Report
216

SoftwareBear posted
I'd advise caution on this.
Given the market just over a year ago, I got a similar mortgage on similar payments with 50% equity over 25 years.
It seems a bit too good to me ... for FTBs and self build (very high risk).
Posted on 05 October 2009 | Love 0 loves Report

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