mortgage value help please?

iwilldoitthistime

Can anyone answer a question please?

my current mortgage deal is ending so I need a remortgage. Ive got about 15% equity in my home. I know when i last went to remortgage and get another deal, they took into account the small amount of debt I had on credit cards.

Can anyone tell me how this is taken into account? Is a mortgage based on how much you can afford to pay or still based on an amount x times your salary??

I ask because Ive got a loan outstanding ( for my car) and I dont know if it will effect the amount I can borrow for the mortgage?

thanks

koexelek

The most common way a lender does is it is multiply your monthly credit commitments by 12, then take them off your annual income before applying their income multiple.

e.g. if a lender does four times income, someone on £25k can borrow £100k
but if that person has a £200pm loan and a £110pm credit card, they can only borrow £85120.

herbiesjp

Loan payments are annualised and then dedcuted from your income

So far example if you have £20k income and a £100pm loan

They would do £20k -(£100*12) = £18800

They would then use their income multiples of affordability calculator using the lower income.

Credit card balances are treated in a similar way - most lenders take either a 3% or 5% minimum payment on the card blance and again annualise and then deduct from the salary before applying any income multiples

iwilldoitthistime

thanks for the replies. How many times salary does a lender usually give? Im currently with the Halifax ( and have been for the last 2 deals) - if I stay with them, can I assume that they will lend at the same rate they did the last time?

thanks

koexelek

Depends on what credit score you get with Halifax.

On a high pass, they could lend 4.5 times.

However, even if your credit rating is excellent, this figure will be dramatically reduced if you have a dependent spouse and/or children.

iwilldoitthistime

Ive worked out that after the £150pm deduction for the car, the mortgage is 3.8 times our joint salary. We have no bad debt, missed payments or other debt so our credit score should be reasonably ok?

I have one (small) dependant. How would this effect things?

koexelek

iwilldoitthistime wrote: »

Ive worked out that after the £150pm deduction for the car, the mortgage is 3.8 times our joint salary. We have no bad debt, missed payments or other debt so our credit score should be reasonably ok?

I have one (small) dependant. How would this effect things?

If you have two incomes, having a dependent child should not be too bad.
If you get a good score you should be OK.

Good luck

herbiesjp

If you are just looking for a product switch with your current lender i.e. Halifax - you should be fine anyway.

They will simply offer you a deal from their current range for existing borrowers and not ask for any extra information if you are not increasing your borrowing.

koexelek

Yes, as Herbie says, the income multiples will only come into it if you are looking to borrow more with Halifax

iwilldoitthistime

thankyou both for your replies. You have put my mind at rest somewhat. I have gone on the Halifax website and it says they will give a 5.98% for 3 years, which seems quite competative. I also know a financial advisor, so I might ask him to look into it for me, just out of interest.

thanks again