What percentage of salary should go to mortgage?

February 8, 2024

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There’s no one-size-fits-all answer to how much of your salary should go towards your mortgage payments, as personal financial circumstances and lifestyles vary greatly. However, financial advisors often suggest a general guideline to ensure that mortgage repayments are manageable and don’t compromise your ability to cover other essential expenses or save for the future.

General Guideline

A commonly cited figure is that no more than 35% of your gross income (before tax and other deductions) should go towards mortgage repayments. This percentage is considered a safe threshold to maintain a balanced budget, allowing for other living costs, savings, and investments.

Considerations

Affordability and Comfort:

While 35% is a guideline, the most comfortable level for you might be lower, especially if you have other significant expenses, such as car payments, childcare, or high living costs. Some may aim for around 25-30% of their net income (after-tax) to ensure greater financial flexibility.

Interest Rates:

The interest rate on your mortgage will significantly affect your monthly payments. Fixed-rate mortgages offer predictability, while variable rates may fluctuate, impacting how much of your salary goes towards the mortgage over time.

Other Debts:

If you have other debts, such as credit cards or personal loans, keeping mortgage costs at a lower percentage of your income can help manage overall debt levels more comfortably.

Future Income Changes:

Consider the stability and prospects of your income. If your job is secure and you anticipate salary increases, you might be more comfortable with a higher percentage. Conversely, if your income is variable, a lower percentage might be safer.

Financial Planning

Emergency Savings:

Ensure you have emergency savings to cover at least 3-6 months of living expenses, including mortgage payments, in case of unexpected financial difficulties.

Retirement Savings:

Don’t let mortgage payments deter you from contributing to your pension or other retirement savings. Balancing mortgage payments with long-term savings is crucial.

Lifestyle and Goals:

Consider your lifestyle needs and future goals. Overspending on a mortgage can limit your ability to travel, enjoy leisure activities, or save for other goals like children’s education or home improvements.

Bottom Line

Ultimately, the percentage of your salary that should go towards your mortgage in the UK depends on your individual financial situation, future goals, and lifestyle preferences. It’s essential to strike a balance that allows you to comfortably afford your mortgage while still enjoying a quality of life and saving for the future. Consulting with a financial advisor can provide personalised advice tailored to your circumstances, helping you make informed decisions about your mortgage and overall financial planning.

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

13.02.2024

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

13.02.2024

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