Additional borrowing questions - affordability etc

bclark

I am after a little bit of advice from you fine people if possible as I am not massively experienced in the world of mortgages.

Our situation is that my wife and I bought our first house 7 years ago, a relatively large house for our first house that needed work that we have done (quite a lot actually). We are now looking to move into something bigger as our first child has arrived and I would like a bigger garden and quieter street etc. We have had our current house valued and our outstanding mortgage accounts for 45% of the value.

Anyway my question really is about getting the additional borrowing and how the mortgage providers go about working out how much they will loan us? I ask because at the moment my wife is on maternity leave and then she is going to be part time for a couple of years so obviously her full salary won’t be counted in any calculations I am assuming? As a result using the system of multiple of salary I am not sure that we meet the criteria for lending us what we would want, but in terms of affordability we have worked out that we can easily afford it. Having calculated our budget once my wife is working part time we will have £750 left at the end of each month (thats after all bills, car payment, general spending, allowance for nights out etc) and according to a quick quote online the additional borrowing we would be looking for would be £380 a month and take our LTV to 60%.

Anyway apologies for the rambling I suppose my key questions are do mortgage companies assess additional lending on affordability or salary multiples and would I be correct to assume that they would use my wife’s part time salary (50% of her usual one) as she will be part time initially?

kingstreet

If your wife is currently on maternity leave, they may not take any of her income into account until she exchanges letters with her employer confirming her return to work and salary level from then.

You are applying for a whole new mortgage on a whole new property, so the application will be underwritten the same as any new mortgage - the whole loan and monthly payment will be assessed. Whatever you've been paying before, and the difference between that and what the new payment will be, are ignored.

The question will be, is the mortgage affordable based on the information you provide?

Many lenders have abandoned the simple income multiple method of calculating your borrowing power and moved on to an affordability calculator which takes into account your personal circumstances in more detail. It will take the loan to value, credit score, dependents, mortgage term, existing credit and income into account.

Here's a link to the affordability calculator intermediaries use on the Halifax site;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

have a play around with the input data to see what comes up. Only use A pass for your possible credit score if you're a Halifax customer and are blemish-free. Using a C pass may give you the most pessimistic view and more properly reflect the market as a whole for when you come to apply.

bclark

kingstreet wrote: »

If your wife is currently on maternity leave, they may not take any of her income into account until she exchanges letters with her employer confirming her return to work and salary level from then.

You are applying for a whole new mortgage on a whole new property, so the application will be underwritten the same as any new mortgage - the whole loan and monthly payment will be assessed. Whatever you've been paying before, and the difference between that and what the new payment will be, are ignored.

The question will be, is the mortgage affordable based on the information you provide?

Many lenders have abandoned the simple income multiple method of calculating your borrowing power and moved on to an affordability calculator which takes into account your personal circumstances in more detail. It will take the loan to value, credit score, dependents, mortgage term, existing credit and income into account.

Here's a link to the affordability calculator intermediaries use on the Halifax site;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

have a play around with the input data to see what comes up. Only use A pass for your possible credit score if you're a Halifax customer and are blemish-free. Using a C pass may give you the most pessimistic view and more properly reflect the market as a whole for when you come to apply.

Thanks for your response.

My wife finishes her maternity leave in September and we wouldn't be looking to move until at least then, plus she has already arranged going back so that shouldn't be a problem. I should also state that we would be porting our existing mortgage with Nationwide so according to them we need a new product for the additional borrowing, although obviously the existing mortgage and payments is taken into account when assessing it.

I had hoped that they would take affordability into account, we aren't extravagant people and seem to have far more disposable income than friends of ours on the same money so I had hoped that simple salary multiples wouldn't be the be all and end all of it.

kingstreet

You're porting your existing offer to a new mortgage, you aren't porting an old mortgage to a new property. Sorry if that sounds a bit pedantic, but loads of people come on here believing they can transfer a mortgage and will have two mortgages when they move.

You approach Nationwide for a new mortgage on the new property. This will be for the full amount you need to borrow. You'll be assessed for affordability on the full borrowing, as I mentioned.

Your mortgage will be split into two sub-accounts. The first will reflect the amount you currently owe on the rate you currently have. This is the ported offer bit. The other sub-account will be for the extra borrowing and will reflect the new product you have chosen from Nationwide's current range.

On the day you move, the old mortgage is repaid and the new mortgage starts and your total mortgage payment is made up of the payments for the two sub-accounts added together.

Sounds like you're far enough away for the maternity issue to be over by the time you'll apply. If you know what she'll be earning, use that as the figure you input in the calculator.

Here's Nationwide's;-

http://www.nationwide-intermediary.co.uk/content/calculators/aff_calc.aspx

bclark

kingstreet wrote: »

You're porting your existing offer to a new mortgage, you aren't porting an old mortgage to a new property. Sorry if that sounds a bit pedantic, but loads of people come on here believing they can transfer a mortgage and will have two mortgages when they move.

You approach Nationwide for a new mortgage on the new property. This will be for the full amount you need to borrow. You'll be assessed for affordability on the full borrowing, as I mentioned.

Your mortgage will be split into two sub-accounts. The first will reflect the amount you currently owe on the rate you currently have. This is the ported offer bit. The other sub-account will be for the extra borrowing and will reflect the new product you have chosen from Nationwide's current range.

On the day you move, the old mortgage is repaid and the new mortgage starts and your total mortgage payment is made up of the payments for the two sub-accounts added together.

Sounds like you're far enough away for the maternity issue to be over by the time you'll apply. If you know what she'll be earning, use that as the figure you input in the calculator.

Here's Nationwide's;-

http://www.nationwide-intermediary.co.uk/content/calculators/aff_calc.aspx

Thanks for that. So on that intermediary site I would put in the total amount I want (including my current mortgage) against the new property price rather than just putting in the additional amount?

For example it confuses me when saying not to enter the outstanding mortgage balance of an additional mortgage if already a Nationwide cutomer, however this chucks out a very large figure and doesn't seem to have accounted anywhere for the fact I have another mortgage.

beecher2

bclark wrote: »

Thanks for that. So on that intermediary site I would put in the total amount I want (including my current mortgage) against the new property price rather than just putting in the additional amount?

For example it confuses me when saying not to enter the outstanding mortgage balance of an additional mortgage if already a Nationwide cutomer, however this chucks out a very large figure and doesn't seem to have accounted anywhere for the fact I have another mortgage.

If you click on additional borrowing, put you current outstanding balance in where it asks for it, and put the additional amount you want in the 'estimated loan' section.

bclark

Are these affordability calculators pretty much the final word in affordability then? I say this because I can easily afford more than the repayments would be on what they are saying they would lend.

I know that people must hear that all of the time and that’s how many people ended up borrowing more than they could afford but I genuinely have so few outgoings that I could afford a few hundred a month more than their calculator says they would lend.

dimbo61

Can you clear any other outstanding debts?
If you have a car loan, HP on the sofa ETC they will have a big effect on affordability!
Can you over the next couple of months overpay the mortgage by say £500 ( Nationwide allow this)
When you visit the branch to talk about a bigger mortgage you can then prove you have already been paying more than the new monthly payment

hcb42

Wow, I think the other way on these calculators, the nationwide there says I can borrow over £400K.

I would die at even the thought of a £400K mortgage! I am 43!

bclark

dimbo61 wrote: »

Can you clear any other outstanding debts?
If you have a car loan, HP on the sofa ETC they will have a big effect on affordability!
Can you over the next couple of months overpay the mortgage by say £500 ( Nationwide allow this)
When you visit the branch to talk about a bigger mortgage you can then prove you have already been paying more than the new monthly payment

I have a car loan at £150 a month and that is all I have in terms of regular debts, Its at a low rate (4.9%) so I don't think that I am a massive debter. Other than that I have no credit cards, HP or store credit.

Maybe I could look into overpaying over the next few months, that may help things.

kingstreet

beecher2 wrote: »

If you click on additional borrowing, put you current outstanding balance in where it asks for it, and put the additional amount you want in the 'estimated loan' section.

It's a purchase, not a further advance.

The "new purchase" button should be used in this context.