Mortgage Repayment amount- is there a limit?

E

Elderflower

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Query on mortgage repayment amount. Wondering if there is a limit on what is paid before using any over payment options.

Looking at purchasing a high value house as PPR and renting out some rooms to avail of the 14K tax free income to support the mortgage repayments.

My question is, is there a max monthly repayment amount? If so how is it calculated, Is it dependent on our salaries? if So, If we tell them our plans to rent out some rooms, would this allow us to increase the monthly repayments
 
There is a max amount on loan repayments as a percentage of net monthly income, however there is nothing to stop you taking whatever term that allows you and overpaying every month, assuming the mortgage type facilitates it. That will have the same effect of reducing the term of the mortgage.

Unlikely these days that a lender would take room rental in a PPR into account but maybe I'm wrong! Thought that practice died with the Tiger but a lot of the not so good practices seem to be inching back in!
 
Monbretia said:
There is a max amount on loan repayments as a percentage of net monthly income, however there is nothing to stop you taking whatever term that allows you and overpaying every month, assuming the mortgage type facilitates it. That will have the same effect of reducing the term of the mortgage.

Unlikely these days that a lender would take room rental in a PPR into account but maybe I'm wrong! Thought that practice died with the Tiger but a lot of the not so good practices seem to be inching back in!
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Are you referring to a fixed rate mortgage? The original poster never mentioned fixed rates. There is no monetary or time limit on overpaying or redeeming early a variable rate mortgage.
 
ClubMan said:
Are you referring to a fixed rate mortgage? The original poster never mentioned fixed rates. There is no monetary or time limit on overpaying or redeeming early a variable rate mortgage.
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I took the query as to more to do with underwriting for amount of repayment rather than overpayments to existing mtg, sounds like they want higher repayments than is usual with the query on rent a room in a new application which usually goes with shorter term but that's the repayment that is limited in my reply.

Actually reading the post again I'm not sure what is being asked, if it was as simple as just overpaying then as you say there is no restrictions on that in a variable rate!
 
ClubMan said:
Are you referring to a fixed rate mortgage? The original poster never mentioned fixed rates. There is no monetary or time limit on overpaying or redeeming early a variable rate mortgage.
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Hi Yes, thanks, referring to a fixed rate. Outside of overpayment options, what would the max you could repay, guessing its based on a percentage of salary, but was wondering what percentage or does this vary from bank to bank?
 
Your salary has nothing to do with any overpayments you make to a mortgage already drawn down, it only comes into it during the mortgage application.

A fixed rate mortgage usually has overpayment options as you have mentioned and you are limited to them other than breaking the fixed rate.
 
Elderflower

You are confusing people.

Which of the following are you asking :

1) What is the maximum I could borrow based on my salary and would the Rent a Room scheme allow me to borrow more?
or
2) I have a mortgage, what is the maximum I can overpay?
 
Brendan Burgess said:
Elderflower

You are confusing people.

Which of the following are you asking :

1) What is the maximum I could borrow based on my salary and would the Rent a Room scheme allow me to borrow more?
or
2) I have a mortgage, what is the maximum I can overpay?
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Hi

Sorry for the confusion. It's neither of those. I will try explain further.

When taking out a new mortgage and choosing what monthly repayment to sign up to make on a fixed rate mortgage, is there a limit. For example, If I earned 4000 a month, guessing the bank wouldn't allow me to commit from the start to pay that amount per month off my fixed rate mortgage. As I clearly wouldn't be able as I would have no other money left.
What is the limit on what they let you to sign up to repay monthly. Excluding additional overpayment options. Is it a percentage of your salary, if so what is this percentage? .
 
Elderflower said:
When taking out a new mortgage and choosing what monthly repayment to sign up to make on a fixed rate mortgage,
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You don't "choose" a repayment amount.
The repayment amount is a function of the amount borrowed, the term/length of the mortgage, and the interest rate charged.

E.g. €300k at 3% fixed over 20 years would be a monthly repayment of c. €1.6k.
 
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Elderflower said:
Hi

Sorry for the confusion. It's neither of those. I will try explain further.

When taking out a new mortgage and choosing what monthly repayment to sign up to make on a fixed rate mortgage, is there a limit. For example, If I earned 4000 a month, guessing the bank wouldn't allow me to commit from the start to pay that amount per month off my fixed rate mortgage. As I clearly wouldn't be able as I would have no other money left.
What is the limit on what they let you to sign up to repay monthly. Excluding additional overpayment options. Is it a percentage of your salary, if so what is this percentage? .
Click to expand...
So each bank would have slightly different ways at looking at it. But they would all look at your repayment capacity.

Depending on how risk averse the lender is a mortgage repayment that equates to 40% or less of your disposable income is a number often mentioned. This may include some kind of stressed interest rate. What they count as income will differ as well. Back in Celtic Tiger days rent a room would have been factored in by some lenders. I don't know if any that do it now.

Don't forget the mortgage rules that will limit most to 4/3.5 times income.

So long story short your age, income and other commitments will all be factors on top of where the lender expect interest rates to go.
 
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