Mortgage payment to monthly disposable income ratio?

[The Hack]

What’s yours been when you were/ are stretching for a great property to live in (not as an investment)?

Mine might be close to 40%, which scares me somewhat. 🙁

I know everyone’s situation is different, with different priorities, but I’m curious. TBH, I’d be happy living in a ‘luxury’ 2-bed flat, with spare money for a nice car lease/ holidays, etc., but my wife has other ideas. No children to think about.

Thanks in advance! 😊

[Sweepinghand]

My house is nearly paid for

I had about 3 years left

However, after the death of my father I decided to totally pass on what I was doing as a recruitment manager chasing big bucks and readjust

I now earn nowhere near as much...
However - I asked the bank to stretch the big I owed them out (at a v v good rate)

I now pay peanuts and house will be paid for regardless when I’m 60
I overpay what I want when I want, but as I’m on a much lower wage, I still have a life

In fact I have a much better life
Less stress
Loads of actual disposable too - it’s bizarre

I have no children - so no idea why I was killing myself to pay if off earlier - it’s great now

[bootneck]

Worst ratio I’ve been at was around 75% of my wages went on the mortgage it wasn’t planed but where I ended up for about 18 months, it taught me a lot about watching what I spent elsewhere back when I was 22-23.
40% shouldn’t be too bad but it all depends on what you value lifestyle wise could kids come along in the future? Are you happy driving an older more sensible car? Not eating out often? Anything is doable If you want it enough these days I value my time with family more than chasing around the world earning more money. I’m looking forward to down sizing once the kids are grown up although after these past few months they’ll be lucky if we haven’t sold up Whilst they’re at school when they eventually go back lol

[awright101]

My house is nearly paid for

I had about 3 years left

However, after the death of my father I decided to totally pass on what I was doing as a recruitment manager chasing big bucks and readjust

I now earn nowhere near as much...
However - I asked the bank to stretch the big I owed them out (at a v v good rate)

I now pay peanuts and house will be paid for regardless when I’m 60
I overpay what I want when I want, but as I’m on a much lower wage, I still have a life

In fact I have a much better life
Less stress
Loads of actual disposable too - it’s bizarre

I have no children - so no idea why I was killing myself to pay if off earlier - it’s great now

Sounds like a good plan, what do you do now?

[Jlynch1984]

It has been as high as 40% and is now less than 10%. I think the right amount is dependent on your needs - if you are foregoing, or struggling to pay for other joys in life just to have a bigger place that you don’t need or wont use, don’t do it. When you are sitting in your bigger house every weekend because you can’t go out or struggling for your annual holiday, the extra bedroom and en-suite won’t mean too much to you :)

If you are future planning by getting a bigger place than you need right now, than that is well worth it. Just before I was married, I bought an absolute sh!t hole and it took me and my new wife 3 years of everything we had to make it how we wanted it... means we could just stay there forever if we needed, other option was a 2 bed terrace and some nice cars... I don’t regret the choice.


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[Mick P]

I bought a house in the beautiful town of Rochdale at the age of 23 in 1972. It was a very large 3 bed detached in a district called Bamford which was full of southerns. It was basically a southern ghetto in a town of whinging northerners who moaned from the minute they got up. Think of Ena Sharples, that was Rochdale.

I had, what was common back in those days, an endowment mortgage, so the mortgage payments(interest only, the endowment payment and my community rates plus payments to the Duchy of Lancaster (the house was leasehold) came to 62% of my take home pay. It was a decision I never once regretted and fortunately I moved to Leamington Spa about four years later. Being skint when you are young is not too bad but being skint when you are old must be a nightmare.

Your aim should be to wipe your mortgage out by 55 at the latest and then retirement becomes a distinct and sensible option.

[Devonian]

Bought my first place in 1993 (aged 23) for 40k and sold it for 54k two years later as I split up with girlfriend. Rented for two years. Bought in 1998 for 108k and sold for 137k in 2000. I bought for 185k which was a lot of money back then based on my dad telling me to ‘borrow as much as you can as young as you can because years later you’ll look back and it will seem insignificant’.

Boy that was a struggle and probably accounted for 50% of my income at one stage, maybe more. Second child was born and things were tight. But it worked. Property started to boom. Still here 20 years later and have probably spent half as much again on extensions to it. Paid it all off 4 years ago.

Doing it young is the key as I worked hard, really hard and built my business up which eventually meant the monthly amount became a lot easier. Can’t ever see property increasing like that again so the advice my dad gave would have a caveat nowadays.

[Mick P]

Bought my first place in 1993 (aged 23) for 40k and sold it for 54k two years later as I split up with girlfriend. Rented for two years. Bought in 1998 for 108k and sold for 137k in 2000. I bought for 185k which was a lot of money back then based on my dad telling me to ‘borrow as much as you can as young as you can because years later you’ll look back and it will seem insignificant’.

Boy that was a struggle and probably accounted for 50% of my income at one stage, maybe more. Second child was born and things were tight. But it worked. Property started to boom. Still here 20 years later and have probably spent half as much again on extensions to it. Paid it all off 4 years ago.

Doing it young is the key as I worked hard, really hard and built my business up which eventually meant the monthly amount became a lot easier. Can’t ever see property increasing like that again so the advice my dad gave would have a caveat nowadays.

Yes for the boomer generation, property was the way to go, like your father said, borrow as much as you could, even at say 10% in the knowledge property would probably increase by double that.

I paid £2750 for my first house in 1970 and two years later sold it for £7200. It was up for sale at £260K three years ago. Says it all really.

[Boss13]

Bought my first place in 1993 (aged 23) for 40k and sold it for 54k two years later as I split up with girlfriend. Rented for two years. Bought in 1998 for 108k and sold for 137k in 2000. I bought for 185k which was a lot of money back then based on my dad telling me to ‘borrow as much as you can as young as you can because years later you’ll look back and it will seem insignificant’.

Boy that was a struggle and probably accounted for 50% of my income at one stage, maybe more. Second child was born and things were tight. But it worked. Property started to boom. Still here 20 years later and have probably spent half as much again on extensions to it. Paid it all off 4 years ago.

Doing it young is the key as I worked hard, really hard and built my business up which eventually meant the monthly amount became a lot easier. Can’t ever see property increasing like that again so the advice my dad gave would have a caveat nowadays.

Great reading. Well I am a bricks and mortar kind of person generally and my dad has instilled the same mindset in me as yours did for you. I took some small gambles when I was younger. If work income is good, that works fine. If I ended up out of work for some reason then issues would have arisen.

When you say you cannot see property increasing like that again, I see your point. However, there is every chance it will once World War Covid is over and Brexit is sorted.

[Devonian]

When you say you cannot see property increasing like that again, I see your point. However, there is every chance it will once World War Covid is over and Brexit is sorted.

I wasn’t really implying about property based on what’s going on now as I think that’s hard to predict (my guess is it will be okay for a while then will struggle as unemployment rises, but then again I thought the stock market would collapse and it seems to be making a strange recovery so what do I know eh). I was more comparing to the previous growth. From around 2000 to now I’d guess that property has trebled at least (I’ve got quite a bit of rental properties and they have doubled and more, one even quadrupled). Right move and zoopla tells me my house is worth 3.5x what I paid based on general house price rises (doesn’t take into account works of course). I just can’t see the market repeating that as the incomes aren’t there. Borrowing back then was 2.5 to 3.0 income, now were at 4.0 to 4.5 and more. A similar growth rate just isn’t viable in the mortgage world (an area I do know well as I have 6 advisers working for me) in my view. Then again who knows eh :-)

[RS404]

My mortgage payment is almost exactly 40% of my monthly salary at the moment. I haven't found that to be a stretch particularly to be honest, maybe I'm too frugal! I don't have any other borrowing though which helps, if I was paying another 2 or 3 hundred a month for a car it would be a different story.

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[SydR]

My mortgage is 16.666% of my monthly income.

Significant down payment on it from proceeds from sale of last one.

Both kids are grown up and financially independent, both in good jobs.

[TonyAFC8]

Mine is currently 26% of my salary, also no kids. My wife’s take home not included.

The % isn’t the key thing for me though, if you are taking him 10k a month I am sure getting by on 6k wouldn’t be too tough. If your taking home 1.8k a month just over 1k will be tighter scaling down or up.

The more you earn the easier it will be, it’s all relative as with most things.


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[Sweepinghand]

Sounds like a good plan, what do you do now?

I work for a broadband supplier - customer services - I love it

[demonloop]

Ours was about 90% of our joint income for about 3 years whilst we were building the damned thing. We were literally hermits, no kids back then thankfully.

Now 0%, as that hardship paid it off. Seemed madness at the time and stretched us financially way more than I even expected, but in hindsight it was the best move we’ve ever made.

But we seem strangely to have as little money now as we did then, so go figure.

[MartynJC (UK)]

always overpaid - wife is not one to hold a debt. I’d say paying 25% of income approx while we had it.

Fortunately (I won’t say luckily) Paid it off quite a while ago from inheritance money and consistent overpayment. We still have the mortgage available as an ‘offset’ mortgage type until I’m 65 in case we need to borrow at the current variable rates.

Just trying to sell the thing - it’s with a development co locked in deal and Covid hasn’t helped. Then off to Portugal. That’s the plan at least.

Martyn.

[Kingstepper]

Mine is currently 26% of my salary, also no kids. My wife’s take home not included.

The % isn’t the key thing for me though, if you are taking him 10k a month I am sure getting by on 6k wouldn’t be too tough. If your taking home 1.8k a month just over 1k will be tighter scaling down or up.

The more you earn the easier it will be, it’s all relative as with most things.


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That’s very true. Ratio itself isn’t really important.

[MartynJC (UK)]

That’s very true. Ratio itself isn’t really important.

To be fair ratios were what the OP was asking about.

(In our company it was a disciplinary if you disclosed your income to fellow workers - things change though).

[MCFastybloke]

My mortgage commitment is two days a month, i have zero debts elsewhere,utilities excepted, i only work now 20 days a month.

[thestore]

If disposable means after tax income about 14% now. I’m looking to move now and if I mad out it will be about 35% which gives me a little bit of anxiety!

My parents have also always instilled ‘bricks and mortar’ into me and it’s worked out well so far. I’m not the best at saving but have used bonuses and commission to overpay mortgages.

[Kingstepper]

To be fair ratios were what the OP was asking about.

(In our company it was a disciplinary if you disclosed your income to fellow workers - things change though).

I know, comment directed to him as much as anyone.

Also hasn't stopped folk posting their property buying history and whatever either.

[redmonaco]

Great reading. Well I am a bricks and mortar kind of person generally and my dad has instilled the same mindset in me as yours did for you. I took some small gambles when I was younger. If work income is good, that works fine. If I ended up out of work for some reason then issues would have arisen.

When you say you cannot see property increasing like that again, I see your point. However, there is every chance it will once World War Covid is over and Brexit is sorted.

Well, Ive an inkling there will be a big correction with prices going downward for the next couple of years. Ultimately though they will bounce back up

[Skyman]

What’s a mortgage?!

[Lammylee]

My Mortgage repayments are currently around 7% of my income and it will be paid off in under 10 years. I have always been pretty frugal ( watches excepted ) no expensive cars/holidays.

For the first time though instead of paying another chunk off my mortgage with saved cash I’m going to spend 11-13K on a motorbike. I’ve done sensible all my life and at 47 I’m going to start touring Europe each year.

[RVFIO]

It’s hovered between 25 and 60% of our joint income, starting off higher then coming down and back up again depending on our situation. Still a long way to go, looking forward to being free of it!

[Skyman]

To be fair ratios were what the OP was asking about.

(In our company it was a disciplinary if you disclosed your income to fellow workers - things change though).

That last sentence in brackets. Really? Fellow workers. What did that mean?

[Boss13]

I wasn’t really implying about property based on what’s going on now as I think that’s hard to predict (my guess is it will be okay for a while then will struggle as unemployment rises, but then again I thought the stock market would collapse and it seems to be making a strange recovery so what do I know eh). I was more comparing to the previous growth. From around 2000 to now I’d guess that property has trebled at least (I’ve got quite a bit of rental properties and they have doubled and more, one even quadrupled). Right move and zoopla tells me my house is worth 3.5x what I paid based on general house price rises (doesn’t take into account works of course). I just can’t see the market repeating that as the incomes aren’t there. Borrowing back then was 2.5 to 3.0 income, now were at 4.0 to 4.5 and more. A similar growth rate just isn’t viable in the mortgage world (an area I do know well as I have 6 advisers working for me) in my view. Then again who knows eh :-)

All fair points and I agree. But as you say, who knows.

2000-2008 was certainly a period of aggressive price growth which may not be repeated.

We then saw growth 2014 onwards until now. Covid could mean another period like 2008 to 2014.

ETA a bit more nuance to the dates.

[rdesouza]

17%... Always overpaying though. Can't wait to get rid of it at 51.

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[Jlynch1984]

My Mortgage repayments are currently around 7% of my income and it will be paid off in under 10 years. I have always been pretty frugal ( watches excepted ) no expensive cars/holidays.

For the first time though instead of paying another chunk off my mortgage with saved cash I’m going to spend 11-13K on a motorbike. I’ve done sensible all my life and at 47 I’m going to start touring Europe each year.

Good for you. Enjoy the fruits of your labour!


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[wotsthecrack]

I was mortgage free at 43, it was not so much the monthly outgoing that was the issue, approx 15% of salary at the time. Once paid off the freedom it gave knowing the house was ours and could never be taken away gave us the confidence to change our life perspective. 10 years on happier than ever working part-time because I enjoy it. Best thing we ever did.

[reggie747]

What’s a mortgage?!

Bit like a Plonker.

[Troubled_Joe]

Our contractual payments are 16% of joint net income. Regular overpayments take that to 32%.

The aim is to have it paid off in the next 6 years (age 45).

It's an average house for the area and we could borrow significantly more but we like it. Maybe I'll look back in a few years and wish we'd stretched ourselves for the dream house but I doubt it.

[Passenger]

I've a vague memory of once being advised that a good rule of thumb is that it shouldn't be more than 25 per cent of your income but that was quite a while ago. Been luckily mortgage free on our Spanish houses since the start, since about 15/16 years back, which is a great feeling especially as other living costs here are generally on the 'affordable' side of the spectrum. Though getting a mortgage over here, as not working, would've been an impossibility anyway.
Everyone's different but there's a lot of satisfaction, security in knowing your home is owned free and clear.

[dougair]

Just checked ours, 27.5% of net income.

[Mick P]

What’s a mortgage?!

A mortgage is something no one over 55 should have but something that everyone under 55 should have, borrowing money to live in a better house and not have to rent makes good financial sense.

[mmgg1988]

About 15% of regular income after tax/NI/pension constributions. However I generally make the maximum overpayments and work some overtime so that takes it to about 38% most months.

Obviously I don't need to make the overpayments all the time, I think 40% as a regular payment would probably be higher than I would like for all but a short time especially if you have lots of other fixed commitments e.g. car/childcare.

[noTAGlove]

Bought my first house in SW18 with my then to be wife, with a £165k mortgage back in 1999.

I distinctly remember the mortgage payments were around £1,700 pcm (interest rate were over 5%) both us bring in less than £3,400 at the time.

But, that was before my wife went on maternity and we then paid the crippling cost of nursery fees, which I can remember where around £900 pcm per child twenty years ago.

So, mortgage payments peaked at well over 50% of net income. We were poor, drove a crap car and had no holidays.

Apart from the plastering, I gutted the whole house too as we had no money to pay anyone.

Now mortgage free and we have a lot more disposable income, but I was as happy back then as I am today.