Mortgage repayments - what's your comfort level?

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driller2000

935 posts

Ultimate Geek

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#1708921 24-Jan-2017 18:53

Yeah for me its about how much I have left after all outgoings + building a buffer for unknowns.

I think a key thing people should do when assessing taking a mortgage on is to do a financial stress test/sensitivity analysis for possible significant changes e.g.

Interest rate changes
1 income vs 2 - incl what sort of duration you could tolerate
Shocks e.g. health issues / deaths etc
Significant purchases required in the short/med term

And based on this work out what level of mortgage outgoings you could tolerate and also what level of emergency funds you may want to try and set aside.

I remember reading somewhere that the vast majority of people were 3 months (?) away from being homeless/losing their homes should their primary income dry up - which is a freaking worry : /

djtOtago

1149 posts

Uber Geek

#1708928 24-Jan-2017 19:21

For me it was about 65% of income went to mortgage repayments. Mortgage was paid off in 8 years.

Basically I worked at getting mortgage paid off as fast as I could.

empacher48

368 posts

Ultimate Geek

#1708929 24-Jan-2017 19:21

We are at 27% living in a rural township of South Auckland. With a 6 year old, 3 year old and a nearly there. Wife doesn't work either, but we can cope with interest rates rising up to 14% per annum before we would have to start cutting out things from the budget, or send the wife to work.

One thing a lot of people overlook is appropriate insurance on your income. When we bought our place we got advice and not only do we have health, life, loss of income insurance, but also was advised for critical illness cover. At the worst case we've spent a lot of money on insurance we don't need. But should we need it, we can very easily pay off the mortgage and then live off whatever the other partner can bring in if required.

Aredwood

3885 posts

Uber Geek

#1709099 25-Jan-2017 02:24

When I bought my first house in mid 2007 I was paying 87% of my income on the mortgage. Only $100 left after the mortgage repayment each week. Only qualified due to slack lending policies at the time. Yes it was risky and a struggle. But I was only 22 at the time. And you would have to be incredibly stupid to pass up an opportunity to buy a house at that age in Auckland.

It's easier for me now but I still wouldn't qualify for the mortgage again under current rules. My income is higher now but still not enough for normal lending. Lots of maintenance to catch up on. But considering house cost 430k at the time and is now worth 1.3mill and at the rate I'm going with the mortgage it will be paid off when I'm about 40 years old.

So it is definitely a case of risk and reward.

I also know someone who bought a house less than 6 months ago. He got his mortgage by getting monthly sales bonus's often enough that he was able to convince the bank that his monthly pay was his standard pay. When it is actually inflated due to the bonus's. If he doesn't make target he only has $200 to pay a months worth of living expenses.

plas

453 posts

Ultimate Geek

#1709121 25-Jan-2017 07:50

28% of a single income in Christchurch, less than what I was saving for the deposit so I'm pretty comfortable. Only issue is I currently cannot get income protection insurance, but I've kept money aside to help cover that and still have the option of getting a flatmate.

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