4.5 x Mortgage?
Discussion
I need some mortgage advice.
I don’t have a lot of outgoings each month, other than rent and my phone. I suppose I have petrol and car running costs but that is not really that much of my monthly take home.
My question is, and I know I should ask my bank but, if I were to apply for a mortgage that was say 4.5 times my annual salary what do you think my chances are? I have looked at the mortgage calculators on line and my monthly payments are below what I pay for rent at the moment, and I still have a 3 figure sum left over for savings each month.
So what do you think? Is 4.5 times your annual salary out the question? Oh an I do not want a self cert one as these rates tend to be really high.
Cheers,
Nick
I don’t have a lot of outgoings each month, other than rent and my phone. I suppose I have petrol and car running costs but that is not really that much of my monthly take home.
My question is, and I know I should ask my bank but, if I were to apply for a mortgage that was say 4.5 times my annual salary what do you think my chances are? I have looked at the mortgage calculators on line and my monthly payments are below what I pay for rent at the moment, and I still have a 3 figure sum left over for savings each month.
So what do you think? Is 4.5 times your annual salary out the question? Oh an I do not want a self cert one as these rates tend to be really high.
Cheers,
Nick
The size of your deposit and therefore the ratio of mortgage to property value will be a big factor. After that, if you've done the maths and enjoy steady employment in a job you've had for a fair while then I should think there will be someone out there will to offer a 4.5 times mtge.
Look at the total cost, not just the mortgage.
You will need, assuming an interest only mortgage, an ISA or similar to pay the thing off. You will need building insurance too. There are always some extras which the banks will not mention unless you ask!
Just to give you an example my 80k mortgage costs me just over 300 pcm but added to that is a further list of extras totaling over 200 pcm. The result is that my real outgoings for my mortgage are 70% higher than the monthly repayments of interest which is what the bank/building society will quote you.
Get a full list of all the costs and ask yourself "what am I going to give up for 25 years to pay this ammount?" (i.e. your rent). NEVER do it the way the banks suggest and add up your outgoings and then subtract this sum from your salary to get the ammount you can afford as this gives a very false figure for what you can afford.
You will need, assuming an interest only mortgage, an ISA or similar to pay the thing off. You will need building insurance too. There are always some extras which the banks will not mention unless you ask!
Just to give you an example my 80k mortgage costs me just over 300 pcm but added to that is a further list of extras totaling over 200 pcm. The result is that my real outgoings for my mortgage are 70% higher than the monthly repayments of interest which is what the bank/building society will quote you.
Get a full list of all the costs and ask yourself "what am I going to give up for 25 years to pay this ammount?" (i.e. your rent). NEVER do it the way the banks suggest and add up your outgoings and then subtract this sum from your salary to get the ammount you can afford as this gives a very false figure for what you can afford.
I understand that it is not only the mortgage that makes up the running of the house. I will also be going for a fixed rate mortgage.
I would save a considerable amount each month, after mortgage and other outgoings.
My monthly out goings would reduce if I was able to get a mortgage for 4.5 times my salary.
I would save a considerable amount each month, after mortgage and other outgoings.
My monthly out goings would reduce if I was able to get a mortgage for 4.5 times my salary.
I am a bit crap with money anyway, but I do have some rules that I try to stick to. If the shit hits the fan then I can trim down my life, cheaper food, older car, sell the TV etc.... you get the picture. But a house is so linked to your life that its the last thing I would sell....
So, would I look at a 4.5x mortgage? Nah. The guidelines of 3 or 3.5 is about the limits. As mentioned dont forget the income protection, life assurance and all that other gumph that goes with it. 4.5x is quite a lot and exposes you a lot to interest rate changes. Could you take the hit and / or sell the house if necessary?
So, would I look at a 4.5x mortgage? Nah. The guidelines of 3 or 3.5 is about the limits. As mentioned dont forget the income protection, life assurance and all that other gumph that goes with it. 4.5x is quite a lot and exposes you a lot to interest rate changes. Could you take the hit and / or sell the house if necessary?
When I got mine, there was no "3.5 x Salary". The bank looked at what the monthly repayments would be, and as long as that, combined with my other "essential" outgoings (car loan, council tax, gas etc..) was less than 60% of my monthly take home, it was fine.
You'll find that, despite new FSA guidelines, the banks are still more than willing to lend you more than you can afford. You need to be careful you're not going to stretch yourself.
On the other hand, for most people, trying to buy your first house while restricted to 3 x salary will leave you with a shed in the middle of the ghetto somewhere.
Catch 22 really.
You'll find that, despite new FSA guidelines, the banks are still more than willing to lend you more than you can afford. You need to be careful you're not going to stretch yourself.
On the other hand, for most people, trying to buy your first house while restricted to 3 x salary will leave you with a shed in the middle of the ghetto somewhere.
Catch 22 really.
Before anyone gives you the heebie-jeebies about rapidly changing interest rates, I thought it might be useful to see the data.....here's the last 15 years of the UK Base rate (obviously mortgage lenders charge extra on top of this). bear in mind that the BOE became independent about half way through this period in '97
AllTorque said:
If you've got a nice deposit and you self-certify, you can get as much as you want allegedly....
and some of the self certs have good rates... yes not the lowest you can get but stil good.. Also not all self certs are really self certs so check them out if you go that way well, basically, the morgage is on the amount you want to borrow (so the house price minus the deposit).
so if the house costs, say £200,000.
a 10% deposit means you need to borrow 180,000 - in all honesty, you'd need about £40k a year to borrow that.
But, if you could put down a deposit of £80k, then you only need to borrow £120,000, then on £25k a year you could probably secure that amount...
different lenders will let you have different amounts, your own bank will probably lend you more than you can afford...
so if the house costs, say £200,000.
a 10% deposit means you need to borrow 180,000 - in all honesty, you'd need about £40k a year to borrow that.
But, if you could put down a deposit of £80k, then you only need to borrow £120,000, then on £25k a year you could probably secure that amount...
different lenders will let you have different amounts, your own bank will probably lend you more than you can afford...
Finally paid off my mortgage last year after 25 years hard slog,(an several hairy moments...
and several house moves, feels wonderful.....
My advice would be don't overstretch yourself, you have a certain quality of life to think about, it's no fun living on beans on toast all week.......
In a rising market it is OK, but remember what happened in the early 90's.......
In my case I bought a brand new detatched stone built bungalow, with a large double garage for £38500 in 1988 and sold it three years later for £90,000......
The guy who bought it off me struggled to sell it for £60,000 two years later..........
Just be careful......
and several house moves, feels wonderful..... My advice would be don't overstretch yourself, you have a certain quality of life to think about, it's no fun living on beans on toast all week.......
In a rising market it is OK, but remember what happened in the early 90's.......
In my case I bought a brand new detatched stone built bungalow, with a large double garage for £38500 in 1988 and sold it three years later for £90,000......
The guy who bought it off me struggled to sell it for £60,000 two years later..........
Just be careful......
Extra 300 Driver said:
I need some mortgage advice.
I don’t have a lot of outgoings each month, other than rent and my phone. I suppose I have petrol and car running costs but that is not really that much of my monthly take home.
My question is, and I know I should ask my bank but, if I were to apply for a mortgage that was say 4.5 times my annual salary what do you think my chances are? I have looked at the mortgage calculators on line and my monthly payments are below what I pay for rent at the moment, and I still have a 3 figure sum left over for savings each month.
So what do you think? Is 4.5 times your annual salary out the question? Oh an I do not want a self cert one as these rates tend to be really high.
Cheers,
Nick
4.5 times your income should be achievable... have you got a deposit? are you a FTB?
Lenders are having to accept higher income multiples now as house prices are beyond the reach of many if they said say, 3 times income...
You will find that you can take a mortgage over a longer term now as well, plus there are many types of mortgage, a stepped rate where it will be cheaper for a year then get more expensive.
A discount where you will be charged interest below the base rate, but will usually be tied to that lender for a couple of years.
Also, if you can buy with a partner, lenders will take into account those earnings as a secondary income... for example, they may offer 3.5 times main income + 1 times secondary, or 3 times joint income etc.
There are so many options... make sure you speak to an independant mortgage consultant and not just your bank. I'd love to help but I'm not qualified... yet!
Minimax will give you a hand I'm sure, he works for the same company
hope that helps
The mortgage HSBC were willing to give me, based on a 10% deposit (although the advisor said 5% was ok), good credit history, account behaviour and whatnot came to 4.6 times salary. I'd have been living on soup for 10 years though, so I went for a more sensible 4 x salary, and aimed slightly lower on the property front. The head beat the heart. The repayment is still less than rental on a similar property. Granted, there are costs on top of that, but then you'd have the same costs if you rented.
One thing I did learn though - don't expect much joy if you just walk into a bank off the street. Other than HSBC, whom I've banked with for an age, and Halifax, who I wouldn't use on principle thanks to those sodding adverts (they were very helpful, to be fair), nobody else would go over 3.75 x salary, yet when I went via a broker, the same banks were happily offering 4.5+ x salary. Pays to shop around and to have a decent deposit.
All the worries I naturally had as a single FTB have been seen off by careful financial planning, a slight adjustment of spending habits and, possibly as a result of the new responsibility, a better attitude to my career that has seen a nice little step in income (with another looming) since I bought the flat pretty much a year ago to the week. That and a bit of Ebay/Amazon ducking and diving
If you're careful and plan properly, I think 4.5 is ok. I made sure I could still save SOMETHING each month in order to build up a reserve - I wouldn't have gone for a repayment that left me with just enough to live on. That said, depends on your attitude to risk I suppose.
One thing I did learn though - don't expect much joy if you just walk into a bank off the street. Other than HSBC, whom I've banked with for an age, and Halifax, who I wouldn't use on principle thanks to those sodding adverts (they were very helpful, to be fair), nobody else would go over 3.75 x salary, yet when I went via a broker, the same banks were happily offering 4.5+ x salary. Pays to shop around and to have a decent deposit.
All the worries I naturally had as a single FTB have been seen off by careful financial planning, a slight adjustment of spending habits and, possibly as a result of the new responsibility, a better attitude to my career that has seen a nice little step in income (with another looming) since I bought the flat pretty much a year ago to the week. That and a bit of Ebay/Amazon ducking and diving
If you're careful and plan properly, I think 4.5 is ok. I made sure I could still save SOMETHING each month in order to build up a reserve - I wouldn't have gone for a repayment that left me with just enough to live on. That said, depends on your attitude to risk I suppose.
Thanks for all the replies.
I have decided to look for something lower down the market, and only go for 3.8 times my salary.
I am not looking to buy this year; I will wait until I finish a loan and have a good holiday before I take the plunge. I am really looking at April ’06.
If I have worked it out I should have a 15% deposit, is that good?
I have decided to look for something lower down the market, and only go for 3.8 times my salary.
I am not looking to buy this year; I will wait until I finish a loan and have a good holiday before I take the plunge. I am really looking at April ’06.
If I have worked it out I should have a 15% deposit, is that good?
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