What's a reasonable mortgage payment?

gemcallaghan

After watching the property bubble slowly deflate over the last few years, I'd be interested to see how much more people think house prices need to readjust by.

While I appreciate many might not agree with my over-simplistic view, in my mind it all comes down to what people can reasonably afford to pay. Reasonable being defined as an amount that allows for an element of contingency for inevitable interest rate rises or other one off costs such as a need to fix a burst pipe etc.

With this in mind, I was wondering would anyone who has a mortgage be willing to broadly outline what their monthly mortgage repayments are as a percentage of their gross pay, and whether they consider that they can comfortably make the payment?

I currently rent and I'm trying to figure out what the "average" reasonable mortgage repayment would be, given that even now a €1200 monthly repayment assuming a 7% interest rate (conservative!!) over 30 years only gets you a €180,000 mortgage!

Unrealistic

gemcallaghan wrote: »

I currently rent and I'm trying to figure out what the "average" reasonable mortgage repayment would be, given that even now a €1200 monthly repayment assuming a 7% interest rate (conservative!!) over 30 years only gets you a €180,000 mortgage!

Last week the EBS raised rates in a range up to 9.1% (10 year fixed for existing customers) and this week they discontinued new fixed rate mortgages. The other banks are going to follow that lead. I think you would need to go a lot higher than 7% if you want to do a real conservative calculation.

3DataModem

If you can afford 8% interest rate with 25-30% of your take-home pay, that's a reasonable upper-end.

johndaman66

gemcallaghan wrote: »

I currently rent and I'm trying to figure out what the "average" reasonable mortgage repayment would be, given that even now a €1200 monthly repayment assuming a 7% interest rate (conservative!!) over 30 years only gets you a €180,000 mortgage!

I think it boils down to what you consider reasonable really. If you wanted your mortgage repayments not to exceed 35% of your nett take home pay you would need to be earning substancially in excess of what is now the average industrial wage (I am assuming your figures are correct and I am not doubting you). Given that €180,000 is still unlikely to buy you an average house yet, at least in Dublin anyway I'm sure I don't consider them figures to be very unreasonable. And 30 year mortgages....hardly reasonable I reckon.

spockety

3DataModem wrote: »

If you can afford 8% interest rate with 25-30% of your take-home pay, that's a reasonable upper-end.

I would add in on a mortgage term of 25 years.

I'd also say 30% rather 25%, as although there are no guarantees, the likelihood is that the mortgage repayment will become a smaller proportion of your salary as the mortgage trundles on. (Yes, I'm aware of the last couple of years, and the next couple...)

jester77

johndaman66 wrote: »

I think it boils down to what you consider reasonable really. If you wanted your mortgage repayments not to exceed 35% of your nett take home pay you would need to be earning substancially in excess of what is now the average industrial wage (I am assuming your figures are correct and I am not doubting you). Given that €180,000 is still unlikely to buy you an average house yet, at least in Dublin anyway I'm sure I don't consider them figures to be very unreasonable. And 30 year mortgages....hardly reasonable I reckon.

Anyone getting a 180,000 mortgage should have at least 20% savings so that would give you around 220k. I wouldn't exceed 25% of take home though, any more would be a struggle for 1 partner to pay off in the event that only 1 salary is available.