Mortgage repayments - what's your comfort level?

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nofam

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#208031 24-Jan-2017 10:40

Hi All,

Appreciate this isn't a home workshop topic per se, but with my new build about to commence, I thought it might be interesting to get some views on what people's levels of comfort are for mortgage repayments as a percentage of their monthly income, given that the property market/salary levels are quite different where I am (Dunedin) vs Auckland etc.

I'd generally say that for me, 33% - 40% would be pretty comfortable, and if my build goes to budget, we'll be sitting around that figure, but when I look at other parts of NZ, I wonder how high that actually goes if you want to be a home owner!

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#1708518 24-Jan-2017 10:53

I'd work backwards.

Determine what $ you need to live, be realistic and allow for unexpected expenses.

That would then give you how much you can commit to mortgage repayment.

It also depends on your risk tolerance.

Just how secure is your income? Can you sleep at night , or will you worry that your income may not be sustainable. In worst case , are there relatives that can help you out, can you take in a boarder, get a second job? etc etc.

You need to be brave, but not reckless

mattyb

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#1708520 24-Jan-2017 11:00

I'm at 47%, in central/east Auckland. Three kids under 6. We're pretty comfortable, but there's not too much rope for extras.

Interesting topic....

MikeAqua

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#1708537 24-Jan-2017 11:05

20% of combined after tax income.

We're in Nelson and both work full time so modern mid-range housing in a nice location is affordable for us.

Mike

afe66

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#1708549 24-Jan-2017 11:21

We had a current account mortgage with a fixed amount going to fixed component and about 50k as floating into which all salary went and paid nearly everything on credit cards.

So any extra money reduced the total mortgage debit. I received some bonuses which reduced size of current account component. Once we cleared the 50k we transferred debit from the fixed to floating without penalty as the interest rate on floating was higher.

Double income no kids, old cars mean we effectively paid much more than 50% income into repayments. Live frugally. No overseas travel.

All our savings for rainy day were dumped into current account and we're thought of as still savings which we would draw down against if sudden crisis. (never needed to)

A.

(Christchurch pre earthquake)

jjnz1

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#1708602 24-Jan-2017 12:27

Wellington northern suburbs, sitting at 24%. About to start renovations which will put us at 36% when complete.

Wife not working at the moment as she looks after the kids, so when she starts working again things will be better.

Satch

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#1708604 24-Jan-2017 12:30

We are at around 35-38% (after tax) depending on the woeful GBP exchange rate (one of our incomes is paid in GBP) and living in St Marys Bay, Auckland. Given we live in the second or third most expensive suburb in the country (depending on which way the wind blows on any given day) I think we are quite comfortable.

We do live a very comfortable lifestyle so have fat in the budget if things did change. We don't have any children either which helps with the bottom line!

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nofam

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#1708609 24-Jan-2017 12:33

Interesting comments, thanks all - no doubt kids add to the cost of living - my 21 month-old is in daycare 4 days a week, and it's our biggest fixed monthly bill by far (after mortgage).

mikebails

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#1708617 24-Jan-2017 12:43

We're at about 30% in Wellington. Its comfortable enough for my wife to be a stay-at-home mother and technically we could pay it off quicker, but I'd rather use extra $ for savings and to have fun experiences/holidays with the wife and kids.

bmt

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#1708637 24-Jan-2017 13:07

I'll be getting a mortgage in early 2018 and based on today's interest rates and how much I think I can save for the deposit I'll be at 52% of take home pay. I've crunched the numbers a lot and done budgets and not concerned about it at all.

kingjj

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#1708645 24-Jan-2017 13:17

BB (before baby) we were at around 18%, after BB we are sitting at closer to 38% (Chch entry level home). I'm looking forward to getting back under 30%. We have budgeted for interest rates to rise and figure we can still be comfortable up to around 45% (after BB).

trig42

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#1708654 24-Jan-2017 13:22

The banks have a formula don't they? I thought it was about 50% of combined total income before they got worried.

Ours is currently about 50%, but we have two houses (one rented). Just about to try and sell one to pay down some mortgage, then hopefully the payments sit at about 35%.

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mattwnz

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#1708661 24-Jan-2017 13:28

I do fear that many people have been sucked in by the low interest rates and spent way more than they should have on a house, which only helped to push up prices. 8 percent used to a low rate, it I suspect there would be a lot of people who couldn't afford that rate if rates go up up to that. In the 80s it was in the double digits. This is certainly something people should be wary of with banks now starting to raise the rates.

jonathan18

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#1708670 24-Jan-2017 13:38

mattwnz: I do fear that many people have been sucked in by the low interest rates and spent way more than they should have on a house, which only helped to push up prices. 8 percent used to a low rate, it I suspect there would be a lot of people who couldn't afford that rate if rates go up up to that. In the 80s it was in the double digits. This is certainly something people should be wary of with banks now starting to raise the rates.

I guess it depends partly on whether one is making minimum repayments or not.

We're spending close to 50% of net income on our mortgage, but that's from choice given we've elected to be making well over the minimum payments - this gives us some degree of slack come increases in interest rates.

The other thing to consider is the quantum of income, not just the proportion spent on mortgage - those on high wages can of course get away with spending a higher proportion.

sidefx

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#1708747 24-Jan-2017 14:24

Very interesting topic. I'm looking to buy soon so have been tracking spending vs rent+savings very closely for the last few months. With this data in hand I'll be looking at going in around the high 40s like 48%... Am a bit nervous as it doesn't leave much wriggle room but with the way Auckland property prices are going saving for longer isn't really an option as prices are still rising faster than I can save. So basically as soon as the deposit is sorted I'll be jumping in as quick as possible.

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mentalinc

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#1708881 24-Jan-2017 17:36

For those looking to buy in the future. I'm assuming you're living currently as if you have the mortgage you plan to have.

I.e. the 48% percent (less your rent) is being sent to savings of some description. So you're not going to have the large shock of less income.

Just be wary of unexpected expenses with home ownership. We needed to a new hot water cylinder (3k) new gutters (3k) within the first 6 months of moving in...

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