How do they decide who to give mortgages to?

Hermia

I know the conventional answer to this as I have read all the property books! When I look at friends who have mortgages or who have been refused mortgages it all looks a bit strange.

Basically I spoke to a couple of people about the possibility of a mortgage (person in bank and person in building society) and they said I simply didn't earn enough. I knew this, but I just wanted to check things out. BUT I know other people who are also not in a great position financially, but have got mortgages.

Basically, I earn £20,000 and I have no debts and about £15,000 in savings. Unfortunately you can't get much property in my area for less than £180,000 so it is perfectly reasonably for any mortgage advisor to refuse me a mortgage. It's just that I am a bit peed off at paying out a lot more in rent (on a rabbit hutch) than friends of mine pay on their mortgages.

The odd thing is I have a friend who has just bought a nice little flat. She has no savings, a student loan and earns less than me. She has a 100% mortgage which I personally wouldn't like to have, but the mortgage advisor presumably thinks she can afford it. I know another couple who earn about £30,000 between them and have got a mortgage for a property in the area.

I am certainly not rushing into buying property or anything like that, but rents in my area are now hitting about £800-1000 a month for a flat so I am worried about what would happen if my landlord wanted me out. I just wondered what other things I could do (apart from save more money) that would make me more attractive to lenders.

Officer_Dibble

Hi Hermia

I can't see how your friends are paying much less for the mortgages than you are on rent, unless they've paid huge deposits.

Your monthly payments on a £165k mortgage would be (at a rough guesstimate) approx £900-£1000, the same as you're paying in rent - unless you go for interest only, in which case you're not actually buying the flat, just paying interest to live there rather than paying rent. Add service charges etc, and you may find you're better off renting and saving.

How your friend get her flat defeats me - unless a self-cert and some creative form filling-in was involved. I doubt if the advisors have a particular grudge against you!

If you do decdide that you can't go on without trying to buy, Nationwide may be worth a try, as they lend on the basis of whether you can afford the repayments rather than on income multiples - though I doubt if they'd go up to £165k.