Getting a reasonable sized mortgage when not earning much

Kaida

OH and I between us only earn around £21000 a year, because he's early in his working life and I'm disabled. We're hoping to move closer to my family in maybe 3 years, but on looking into mortgages the banks wont give us enough to buy anything other than a really tiny flat in a crappy area. We live frugally and have plenty of spare money each month. We're currently paying a mortgage of around £400 a month, plus putting £500 a month into savings for a deposit, and have now about 15% equity in our current home (technically owned by my parents but we pay the mortgage).

Is there anything we can do over the next few years to increase how much they give us? I've applied for a credit card for us to spend on and pay off in full each month. Is there anything else?

ginvzt

The banks work on multiples to some extent, so depending you may be offered 3-4 times the salary (maybe 5 if you are lucky). There is nothing you can do about it. how much do you hope (wish) to borrow in 3 years time?

But what you can do is save. You are doing well by putting £500 a month into savings! At that rate you will have £18000 in 3 years time, which plus the equity from your current house will make a decent deposit. Make sure you shop around for the best savings account, as every penny counts!

Kaida

We'd be hoping to move to a family home as by then we'll have one little one and be planning at least one more. It's Stafford we're hoping to move to, too, so not cheap. Ideally £200k-£300k, which would get us something with a decent sized garden for the dogs, but that's in a dreamworld I know. We will have a good sized deposit, but it's no use if the banks wont lend us the rest, even though taking one look at our accounts would tell them we can afford it.

_Andy_

Absolute top end would be 5xjoint income.

Kaida

We're going to end up having to rent, I think, to get a decent house. It's frustrating that they go on multipliers rather than affordability.

Hopejack

To be fair I don't know your circs but you say you have no family right now, we used to save (when I was working and before kids) more than that a month and now we have two young children and I'm at home with them, we don't save half of what we used to and my DH is on a good salary!

So I think the advice of save and save some more while you can is great! If you can rent in the new area and save then great! We've found though that perversly our rent (we are currently renting although we own our own house which we rent out - long story!) is more a month than our mortgage would be but I think we are being more than sensible about what realistically we can afford with two young children and me not working etc. When children come into the equation unless you are earning v high salaries, you do start to feel the pinch - we have at least and I know I would not want a high multiple mortgage hanging over our head just in case, but then that's me - I'm a born worrier! :rolleyes:

I do think you'll struggle to get such a high multiple mortgage though - unless things in the mortgage world change significantly over the next 18 months or so but then some would argue that they don't want it to go back to the days of 5-7 x earnings and 110% mortgages as that is one of the reasons we are in the situation we are now - banks almost folding due to silly lending etc.

Hope you get sorted out - the bigger deposit the better

Hopejack

To be honest though, if you are talking about 2 children in the future sometime soonish then your affordability really does take a knock. Unless you are lucky enough to have family who can mind young children so that you can go back to work or you have a high paid job where paying childcare won't dent it too much. One of the reasons I'm out of work is that I chose to stay at home with the children, BUT, it's also because childcare just meant it wasn't worth me working really as we'd get no help at all.

Affordability now as opposed to along the line with two kids imho is very different...... Only just from my experience anyway!

Chinkle

Kaida, you seem to thing salary multiples are just plucked out of the air and not based on average affordability.

Right now we are on historically low interest rates, but a mortgage of £265 (assumming you have saved up £20K deposit plus £15K equity of your current house) for your dream house of £300K would require repayments of approx £1,300 a month for 25 year loan at 3.5%.

Can you really afford that on your income? And what about when interest rates start rising, they can't stay this low forever.

Kaida

Children shouldn't dent our earnings much, since I'm at home anyway so we won't be going down to one income.

My dream house would be 300K, but being realistic 200K would be more likely, and they won't even lend us enough for that. That would most certainly be affordable each month, even when rates go up. With the only multiplier I could find when I was looking being 3.5, we'd only be able to borrow 73k. Have you seen what that gets you now? Certainly nowhere I'd bring up kids, let alone live myself.

Tuscan

what you could do, is get a sensible mortgage that you can afford on a buy to let, rent the property out so your still on the property ladder and then go rent a bigger home for your family to live in. if you have a big deposit then you could keep your mortgage payments low and even make a profit on the rent to put towards the rent on the home your living in...

_Andy_

As things stand then you just need to accept that what you want and what you can actually have are two different things.