Can I afford to buy?

[jamesbrown]

The above budget is based on keeping within the tax efficient salary and dividends of next tax year. Of course, if things got tight, I could go over the lower taxed dividends but I'd prefer not to. I'm hoping to buy a home that is affordable even if contracting goes belly up in the near future.

Why £38,950? The notional dividend tax credit is disappearing next year, so the gross dividend for tax purposes is equal to the net dividend (but you will be paying more in tax)...

[PurpleGorilla]

50% of your income on the mortgage, and some very cheap cost of living figures to go with it. Food & drink is somewhere you could make huge savings. But that probably doesn't suit where you are at. I find it exceptionally hard to relate to these figures, but they seem non credible (some of these must be under estimates). It feels like you are working hard on the spreadsheet to make it all work. But honestly mate, life doesn't fit nicely in a spreadsheet. So my opinion. No I don't think you can afford to buy at £450k

[heyya99]

Why £38,950? The notional dividend tax credit is disappearing next year, so the gross dividend for tax purposes is equal to the net dividend (but you will be paying more in tax)...

Based on receiving £43k (£8,052 salary + £34,948 dividends), my tax liability will be £2,025, but I will need to set this amount aside again, so £4,050 in total because of the payments on account.

43000 - 4050 = 38950

[PerfectStorm]

The annoying thing is, if I reduce my budget to 400, then the repayments are still over 1500 per month. If that is the case, I'd prefer to take the hit on the deposit, but have a nicer, more spacious place.

Don't forget that upwards changes to the rate of interest will affect the 450k place more significantly than the 400k one.

[jamesbrown]

Based on receiving £43k (£8,052 salary + £34,948 dividends), my tax liability will be £2,025, but I will need to set this amount aside again, so £4,050 in total because of the payments on account.

43000 - 4050 = 38950

OK, payments on account. These won't be due until Jan 2017 and June 2017, but it makes sense to set the money aside. I didn't read the whole thread, but what are you doing w/r to a warchest? Make sure you have sufficient savings put aside, personally and with a backstop in the company, as required. Think about pension contributions too. Depending on what Gidiot decides to do in March, these could suddenly become very attractive for a basic rate taxpayer (and equally unattractive for a higher rate taxpayer).

Overall, your figures seem technically doable, but pretty tight TBH, and this probably isn't an environment in which you want to be stretching yourself too far (i.e. very low interest rates, very stretched valuations).

[SueEllen]

50% of your income on the mortgage, and some very cheap cost of living figures to go with it. Food & drink is somewhere you could make huge savings. But that probably doesn't suit where you are at. I find it exceptionally hard to relate to these figures, but they seem non credible (some of these must be under estimates). It feels like you are working hard on the spreadsheet to make it all work. But honestly mate, life doesn't fit nicely in a spreadsheet. So my opinion. No I don't think you can afford to buy at £450k

Unfortunately 50% is the norm in London.

However the budget looks wrong. Clothing, entertainment, presents and other travel expenses are missing. If a broker makes you do a budget planner these need to be put in.

Food and drink expenses especially the drink expenses are high. The insurance costs are high as well - what are you insuring? Contents insurance for a self contained flat isn't that expensive especially if you change insurers every year.

Everything else oyster, utilities and service charge (which is high ) will increase next year.

[WTFH]

3 bed end terrace house for sale in Kestrel Way, Leighton Buzzard LU7 - 39363912 - Zoopla


£275k, 5 minute drive to a mainline station that takes you in to Euston
£4k for an annual train ticket.


So, lets say you put in a 75k deposit and get a 25 year mortgage at 1.88%, that's repayments of £836 per month. If you choose to overpay by 20% rather than 10%, that means £1,000 per month for the mortgage, saving you £600 per month.
Take out the cost of the train ticket and you are still up £250 per month, in other words close to double your current amount.


BTW, that was done with 2 minutes of searching.

[d000hg]

3 bed end terrace house for sale in Kestrel Way, Leighton Buzzard LU7 - 39363912 - Zoopla


£275k, 5 minute drive to a mainline station that takes you in to Euston
£4k for an annual train ticket.


So, lets say you put in a 75k deposit and get a 25 year mortgage at 1.88%, that's repayments of £836 per month. If you choose to overpay by 20% rather than 10%, that means £1,000 per month for the mortgage, saving you £600 per month.
Take out the cost of the train ticket and you are still up £250 per month, in other words close to double your current amount.


BTW, that was done with 2 minutes of searching.

Have you not listened to a word said? Maybe he doesn't want to drive to the train station. Maybe he doesn't want to have to get a train every time he wants a drink, maybe he doesn't want to have to clean and heat a 3 bedroom house when he only needs one room?


The updated figures look OK. As mentioned, food+drink is a big chunk but that's presumably part of the lifestyle you want to be central FOR?

You could always curb your extortionate charity costs.

[heyya99]

The travel costs (weekend breaks away) and clothes were to come out of the surplus of 450. I wouldn't be doing those things every month.

I know going into the extra 32.5% dividends isn't ideal, but would that provide a decent safety net? I'd hate to have to use this option but it would make me sleep better at night! Surely not everyone can afford to live on 39k net in London.

[WTFH]

Have you not listened to a word said? Maybe he doesn't want to drive to the train station. Maybe he doesn't want to have to get a train every time he wants a drink, maybe he doesn't want to have to clean and heat a 3 bedroom house when he only needs one room?


The updated figures look OK. As mentioned, food+drink is a big chunk but that's presumably part of the lifestyle you want to be central FOR?

You could always curb your extortionate charity costs.

Oh yes, I have read what has been written. "I'd like lifestyle XYZ but my finances will be stretched to the limit to support that"


Financially I would consider it too high a risk, as I stated a couple of pages ago, hence I am offering a suggestion that leaves more money available each month.


Some suggestions have been made that might save <£100 per month. All I've done is made a suggestion that would save considerably more than that and while it might not achieve the long term goal immediately, it would be a stepping stone towards that.