Can you borrow over 4 times in current climate?

jono77

Hi,

We need to repay a family loan as soon as possible due to a change in circumstances otherwise we risk having to put our home for sale which we have worked our socks to renovate over 2 yrs. I think it would break my partner's heart. So I'm hoping someone can offer some advice.

Our personal circumsance is a family of 4 (two kids 5 and 3). My partner does not work but hopes to soon so that will help when she does.

We owe just shy of £138K. Currently I earn just over £33K as a base salary and get about £5-6K in bonuses a year.

We can probably rake together about £10K. So we need to borrow about £130K which is about 4 times my base salary. To protect us I guess we would want a fixed rate mortgage (and ideally just interest initially till my partner gets work).

Are there lenders out there that will lend that amount in the current climate. From my reading I have seen that lenders will do 3-3.5 if a sole applicant or 2.5 if joint.

If so am I best to go to high street bank or go via a whole market/no fee broker?

Thanks very much

Rob71

I suspect you're going to find it difficult to nigh on impossible (sorry!), but please don't just take my word for it.

I would suggest talking to brokers with some knowledge of the products on the market - don't hold your breath, but equally nothing ventured, nothing gained.

Charterhouse

This depends heavily on the LTV. I think at 4x income you will be out of luck if you are looking for 85%+ LTV. If you are down in the 60-75% region you may well have more luck.

Do you have a mortgage of any sort at the moment and what is your property worth, bearing in mind that a bank sponsored surveyor is likely to value it on the conservative side (i.e. maybe 10% lower than you might think it is worth)?

Let_Us_See

As long as your credit file(s) are OK and you have no ongoing existing financial commitments then you shouldn't have a problem of 4 X income even at 85% LTV. See a whole of market broker.

jono77

Thanks for the replies. I read the first post and my heart sunk but the last two have given me a bit of optimisim.

We don't have any other debts and the house is mortgage free with the only debt outstanding being the family loan. I would guesstimate the house being worth 290-300K.

I've emailed a whole of the market broker so touch wood they can find something.

tomthelondoner

Let me clarify first - do you own an unencumbered property and want to remortgage it to raise the £138k? What is the current estimated value of the property? Please bear in mind that the lender will usually err on the side of caution and downvalue the property a little bit. Ideally your house should be worth at least £184k, this would give you 25% equity and you would be at 75% LTV range. Very few lenders will agree on interest only over 80% LTV...


Another thing to consider that would impact the affordability calculation is the fact that you have a partner and two children - ie 3 dependants. For instance with Woolwich you have to have at least £551 a month left after paying mortgage and council tax and all your current credit commitments (such as HP loans, credit card balances, personal loans etc), but a family of four would need a minimum of £957 left a month. But that's Woolwich, each lender has its own criteria. I assume that you are employed, as opposed to self employed, and have been with the same employer for at least a couple of months.


On the question: should I speak to a no-fee whole of the market adviser or go shop in local branches - it is like asking: I have a 53 reg BMW 316i, should I go visit a couple insurance companies that opened high street branches in my city or should I ask an FSA certified, experienced fee free insurance broker to go to www.confused.com and find the best deal for me? I think you know the answer...

Income multipliers depend on the LTV and the lender - many are happy to go up to 5x, but some also impose additional affordability test. Please annualise all monthly credit commitments and deduct them from annual salary BEFORE applying multipliers. Another funny thing about the affordability calculators is that they rarely take the ACTUAL payment into consideration. Let me illustrate it with an example: you may qualify for an interest only 1.98% tracker and your payment may be very low and you may think that it all checks out. But the lender will assess your affordability against a monthly REPAYMENT mortgage with an interest rate of, let's say, 5.39%. It may be twice as much as interest only 1.98% and they will fail you, even though you CAN afford the actual monthly payment (at least for as long as the variable rate stays on 1.98% and it is an interest only mortgage). Not a lot of people know that, but many lenders do it.

tomthelondoner

jono77 wrote: »

Thanks for the replies. I read the first post and my heart sunk but the last two have given me a bit of optimisim.

We don't have any other debts and the house is mortgage free with the only debt outstanding being the family loan. I would guesstimate the house being worth 290-300K.

I've emailed a whole of the market broker so touch wood they can find something.

I have just read your post - that should be a piece of cake, providing the affordability checks out and the property represents a suitable security for a mortgage. At that LTV you may expect fixed rate below 4% or trackers below 3%.

Charterhouse

jono77 wrote: »

Thanks for the replies. I read the first post and my heart sunk but the last two have given me a bit of optimisim.

We don't have any other debts and the house is mortgage free with the only debt outstanding being the family loan. I would guesstimate the house being worth 290-300K.

I've emailed a whole of the market broker so touch wood they can find something.

Assuming that your outgoings are not huge, I would expect that you would be able to get a mortgage for 4x salary or £140k ish based on this. An LTV below 50% is something all lenders like to see as it reduces the average LTV of their book rather than increasing it as most will do. You should also have access to the better deals available.

Good luck.

Thrugelmir

Here's a link to help you find suitable mortgage products.

http://www.fsa.gov.uk/tables/bespoke/Mortgages

herbiesjp

Whilst I think you will find a mortgage/lender to do this for you - don't forget you are the sole income earner, and have at present 3 "dependents".

Or at least that is how most lenders will look at it.

The LTV does go in your favour, and you will find a lender, but the choice will not be as great as if your partner were working also

Let_Us_See

Here's a link to help you find suitable mortgage products.

http://www.fsa.gov.uk/tables/bespoke/Mortgages

This site is notoriously inaccurate. You would be better off with a blindfold and a pin!