How to determine housing budget?

I'm not sure how much to realistically budget for my housing expense. My husband used a PAYE calculator of some sort that showed what our income would be after taxes are deducted and it seems quite good but I know that childcare is quite expensive for 2 daycare aged kids.

How have you guys realistically determined budgets for housing and childcare?

Hi Julia Atlanta,

The 'general' budget for your mortgage outgoing is around the 17% level of your take home pay - some years ago, this figure was around the 27% mark.

As others on the site have pointed out, I go along with the fact that some 'statistics' can be a load of tosh, so I always take quoted stats with a pinch of salt!!

It's very difficult to be accurate on these kind of things over a web forum and lifestyle aspects of others which can vary your budget quite considerably.

However, the above figures do 'seem' to be quite a bit 'off mark' for even the 'average salary' levels across all the regions of the UK. That said, first time buyers (domestic or foriegners coming into the UK) do make up a relatively small share of the market and so those figures may well cover the complete cross section of mortgage payers.

I suspect many first time buyers will see a significant increase in those figures for their own budget and salary income and costs levels for everyday life - I'd estimate at least double those figures?!

The trick is to look carefully at your financial situation, your lifestyle wants and needs, and balance them as best you can to keep all elements moving. As usual, that quite often means compromising on certain elements in order to keep things moving

Only you know the realistic levels of income you and your better half will get, and only you know how you want to run your lives with your kids etc, so take those as your benchmarks and try different scenarios out, a different/cheaper place to live, cutting back on A and B in order to achieve X and Y etc etc.

Stats wise, work out what %age of your income you are willing to divert to certain elements and vary those accordingly to certain requirements and then of course compare with what you get on the market (housing and services and goods !) to see where the best fit for you is.

PS dont forget those extra 'housing' costs - council tax, insurances, tv licenses, maintenence, repairs, emergency repairs, redecorating, kids needs, rates, utilities !!

Hope this helps a bit !

DtM! West London & Slough UK!

Oh my goodness, 17%!   How does anyone ever buy property?  Here in France it has been around 30%.  17% seems incredibly low.  For example, if your mortgage payments every month were 1000 pound, you would have to be taking home close to 6000 pound a month, or 72,000 pound a year after taxes.  Please tell me I've misunderstood.

Mme K

Yes I think you've misunderstood slightly - the figures now are around 19% of your take home pay goes towards the mortgage cost, so up slightly in the space of a few weeks.

You must remember these are 'average' stats given as a reflection of the complete market, that includes first time, 2nd and 3rd time/ladder buyers and of course the top end.

There are (relatively) extremely few jobs that pay 72 grand after taxes - I'd suggest a substantial number of those with a mortgage payment of around £1000/month are married couples in the 30-40 years old bracket. I'd also put forward again that they use a good significant more than 17 or 19% of their combined take home pay to put towards that mortgage.

With todays interest rate rise to 5.75% and more than likely it going to 6% before the end of the year, disposable income across most households is going to be squeezed even further. The 'jitters' in the market are lasting longer, there's been the resurfacing of the word 'recession' and more references to 'less consumer spending' and 'long term financial restrictions' - add the uncertaintly with the US dollar, the Chinese market going into overdrive, many of the 'financial boffins' are forecasting tougher times ahead both domestically here in the UK and of course on the global economic scale.

Budgeting, spending within your means, planning and being careful with money has never been so important as it is now - the UK is built on 'excessive personal borrowing' and the usually not even thought about 'repyament' aspect is coming back to bite the vast majority who've overstretched rite in their jacksies - which could mean the tip over for bankruptcy. This scenario is a very likely one for those whose 2 year fixed rate mortgages will send soon and they will have to remortgage at costlier rates and pushing many into the red.

Read the various financial reports out today with the interest rates rise and the above is all written in various reports. What they dont really say is how the UK's consumer base 'attitude' should change to take on less debt in order to soften the blow when interest rates rise like this. Only a smallish percentage of that user base is clever enough to spend, save, financially plan successfully enough for times like these not to bother them too much.

I would urge everyone to take control of thier finances to be in a much better financial situation for times like this - assuming they dont go bankrupt first.

Cheers ! DtM! West London & Slough UK!

Julia,
I thought you might be looking for specifics.  If I remember correctly you posted about renting for 2000 pcm in London area.  I wont comment on this cost as you would better know what you want to pay and where by looking on-line.  However, here's household expenses I pay for a 3-bed terraced home:

Water = £200/year
Electric = £39/month (direct debit by estimate, it may be high)
Gas = £39/month (again, direct debit by estimate, it may be high)
Council tax = £150/month but you should look at the tax by band in your area using upmystreet.com
Home phone = £25/month
Mobile - Me = £20/month (cheapest plan as I use my work phone mostly now)
Mobile - Wife = £30/month
Home insurance for contents only = £250/year I would guess, could use on-line quote
TV License = £135/year
Train pass = £460/year (but only 2-stops from Central London so this is on cheap side)
Car + car insurance = if you need these you'll have to do your own number crunching for what you want.  You may have to pay over-the-top for not having a UK license.

For daycare we pay £20 for a half-day (not even, just 3 hours I think).