sensible proportion of total income

B

blackie

Guest
as a proportion of total monthly income - what should a mortgage payment be? eddie hobbs says 30% - but this seems like a lot to me.

blackie
 
Ideally it should be as low as possible in my view but there's another recent thread (can't find it at the moment unfortunately) that mentions lender using c. 40% of net income less monthly living expenses (as well as other criteria) as a guideline for deciding what sort of loan somebody can afford to service.

Update: found the thread in question.
 
By "living expenses" do you mean:


all bills
other loans
groceries
creche


ie everything other than savings?

blackie
 
Yes - I presume it means all bills etc. and would include any regular savings that one is committed to and cannot cease (if applicable). I guess it would be disposable income left over after meeting all monthly/annual financial commitments. Does that make sense?
 
ClubMan said:
Yes - I presume it means all bills etc. and would include any regular savings that one is committed to and cannot cease (if applicable). I guess it would be disposable income left over after meeting all monthly/annual financial commitments. Does that make sense?
Click to expand...

I'm not sure that it does mean all bills just other "commitments". In the thread you quoted the poster who brought this up just included other loan repayments. I think very few people would get mortgages if it was 40% of your net income less all bills such as groceries, utilities etc. The other 60% is meant to be for this.
 
The recommended guidelines are that you are using a max of 40% of your disposable income to service loans and financial commitments. The balance is to service other outgoings .. bills, grocerys etc.......

Sensibly I think 35% is enough, however I work it up to 40% to include other monthly expenses ie, car insurance , life assurance, home insurance etc.....
 
Depends on your other financial commitments, car loans, family or other dependants. i.e. how far does the remainder have to stretch. Also depends on the size of the pie, someone on a 80K salary will get away with a higher percentage than someone on 60K
 
tiger said:
Depends on your other financial commitments, car loans, family or other dependants. i.e. how far does the remainder have to stretch. Also depends on the size of the pie, someone on a 80K salary will get away with a higher percentage than someone on 60K
Click to expand...
Good on you, tiger!

The obsession with percentages is unhelpful. The real question is will the borrower have enough cash left to live on even in the event of an x% (decide on the value of x for yourself) rate rise?

At various times in my life the percentages of income I have been able to devote to mortgage repayments have fluctuated wildly. The reason? As with most other things in life - children...
 
According to Dr Dan at the Bank of Ireland, the long term average over the past 30 years is 28% of an individuals gross income for average mortgage servicing.

I suspect this number might be skewed upwards by the past 9 years though.

Back in 1994 - 1996 the average was hovering around 20% of individual gross income.

Fast forward to today and we are looking at cases of up to 40% of a couple's combined net income servicing debt when the ECB has yet to raise interest rates from their 50 year low ??? Risky Risky !
 
28% of an individuals gross income for average mortgage servicing makes me feel a lot better! thats about what i'm about to embark on - except we're coming up from 14%. So its a big step up but like oysterman said.... children....
 
You must log in or register to reply here.
Back
Top