Affordability (& variable income)

I'm hoping someone on here can offer some advice about mortgage affordability and in particular with a variable income as we're hoping to buy a house but unsure how much we could or indeed should borrow.

Bit of background: I earn roughly £65k a year (£34k basic + commission). I've worked for the same firm for 10 years, my earnings have been consistent always in excess of OTE & I expect to earn similar going forward plus my employer is happy to confirm it as regular/guaranteed commission to a lender. My partner is currently caring for our young children but is likely to return to work once they are both at school so future (3+yrs) earnings should increase somewhat.

We had a small mortgage until we sold last year & now have a healthy deposit of £225k. Aside from our current rent (£1k pcm) which will presumably stop when we buy, no other financial commitments. We live in a fairly expensive part of the SE & i commute to London so living costs are quite high.

So, two questions really: what will mainstream lenders be prepared to offer me? And being realistic & sensible but also wanting the best house we can afford, what is the maximum we should consider borrowing? Not sure how relevant this is but I've got my eye on a 5 yr fixed at 4.99%.
Thanks in advance.
MC

Replies

  • herbiesjpherbiesjp Forumite
    8.5K Posts
    Mortgage potential will be reduced by most lenders because your partner is not in FT employment and the number of children you have (how many children do you have?).

    It might be easier looking at this backwards - what house prices did you have in mind?

    Is the £225k purely deposit, or will stamp duty expenses have to come from that as well?

    Once we know that, then we can have a rough idea of figures, and see how realistic the 4.99% fixed rate would be
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Thanks herbiesjp. We had a house buying figure in mind of up to £400k - we came up with this figure as a while back when rates for a £175k mortgage gave us monthly payments similar to our rent which is proving quite managable. We are now wondering whether we could, or indeed should, stretch this any more as (unbelievably) £400k doesn't buy much round here.

    BTW, we have 2 children (6 months & 3.5) and £225k is purely deposit - we have additional monies kept aside for buying costs inc stamp duty.

    Thanks in advance.
    MC
  • herbiesjpherbiesjp Forumite
    8.5K Posts
    I know the prices in the SE area fairly well as I live in London myself

    You should be able to get lower than the 4.99% you have found, as the figures you have posted are good (that would mean mortgage payments of around £1022 pm on a 25 year repayment mortgage)

    But then again I know nothing about your circumstances apart from what has been posted, so you may or may not be eligible for them

    Have you gone via a a broker or done the research yourself (the 2 children and husband reduce the affordability calculations with quite a few lenders)?

    A broker would hopefully make sure that affordability is ok, and that lending criteria is met straightaway without wasting applications on lenders who would say no.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Thanks Herbiesjp - it sounds like we need to find a broker as so far we've just used the internet, best buy tables etc.
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