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cybernoid

Salary Multiples

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As a general rule of thumb I'm thinking of a mortgage of 3 times my gross salary as being 'affordable', whilst taking into account potential future interest rates to come up with a figure I can borrow.

How flawed is this? People speak of around 3 times as being a sensible multiple, mostly due to average salary multiples allowed by lenders in the past. Is todays 3 times salary AFTER TAX less than it used to be? And what about indirect taxation, that is tax you have to pay out of already taxed income, such as council tax? Are we taxed more now than we have ever been? With larger salaries of course there is the higher rate tax band to consider also, the calculation doesn't seem as simple as a salary multiple to me.

Is 3 times gross salary a sensible level of debt to be taking on?

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