Income multipliers or actual affordability?

callmechar

For us, FTBs income multipliers arent great and we cannot get what we want. However in practice (a few lenders) will lend us what we want - just about.

What we want over 30 years is approx £100 a month more than we pay now in rent and we will still have over £500 a month leftover to spend each month after all expenses when we have the mortgage.

Do lenders use affordability and income multipliers or are they more reliant on one than the other? I have done income and expenditure sheets to prove what we spend now and what we anticipate to spend with mortgage. However are lenders going to be strict with the multipliers?

Ideally we want approx 4 - 4.2 multiplications of our income. We have no debts, just my student loans and childcare = £130 pm for both.

I am quite keen on the Post Office mortgage...once I have found a house of course. However we need to know what region to look in.

poppy10_2

callmechar wrote: »

What we want over 30 years is approx £100 a month more than we pay now in rent and we will still have over £500 a month leftover to spend each month after all expenses when we have the mortgage.

Interest rates are currently at a 300-year low. Will your calculations still work out if interest rates rise to their long term average (around 12 times the current rate)?

How much of a deposit do you have saved up? This will affect what mortgage products are available to you.

callmechar

poppy10 wrote: »

Interest rates are currently at a 300-year low. Will your calculations still work out if interest rates rise to their long term average (around 12 times the current rate)?

How much of a deposit do you have saved up? This will affect what mortgage products are available to you.

Currently 5% saved...but going for 10% and maybe getting help from family to get us 90% mortgage

Yes we have factored in interest rate changes. We aim to overpay and increase equity and then get a better deal after the 3 year fixed rate ended. So hopefully with more equity, cheaper re mortgage and so even if int rates increase we will hopefully be ok.

We are looking at int rates now around 5% mark

grey_lady

That's quite a high ratio, also £500 left over for everything else doesn't seem a lot, e.g. My council tax is £180, my gas/electric is £160, my water is £25, bt is £35 inc broadband, insurance is £20ish and tv is £12 so that's £432, I then have grocery money, travel to work money, birthday/clothes/Christmas/haircut and pin money plus rainy day money, I'm sure my boiler will need replacing soon etc etc, have you really looked at your budget?

callmechar

£500 left after paid ALL bills and including money for holidays etc. £500 left for us to save etc. Yes I have looked at my budget...used to be a money adviser!

So £500 after both of our incomes pay the mortgage and EVERYTHING else....

alexlyne

After looking at an online affordability calculator and speaking to a bs (YBS), my student loan and our childcare costs decimated the amount that they would lend to us. If I didn't have either it was 180K, with them it was 100K! which is less than 3x.

maninthestreet

callmechar wrote: »

Currently 5% saved...but going for 10% and maybe getting help from family to get us 90% mortgage

Yes we have factored in interest rate changes. We aim to overpay and increase equity and then get a better deal after the 3 year fixed rate ended. So hopefully with more equity, cheaper re mortgage and so even if int rates increase we will hopefully be ok.

We are looking at int rates now around 5% mark

If interest rates rise significantly, why would you get a better deal in 3 years time?? You haven't yet told us what your gross incomes are, and exactly how much you hope to borrow. This may help us to determine whether you are being realistic or not.

callmechar

I earn 23750, partner earns 22500. We want approx 180 to 190k.

DVardysShadow

callmechar wrote: »

Currently 5% saved...but going for 10% and maybe getting help from family to get us 90% mortgage

callmechar wrote: »

For us, FTBs income multipliers arent great and we cannot get what we want. However in practice (a few lenders) will lend us what we want - just about.

Ideally we want approx 4 - 4.2 multiplications of our income. We have no debts, just my student loans and childcare = £130 pm for both.

callmechar wrote: »

I earn 23750, partner earns 22500. We want approx 180 to 190k.

Total earnings 46250. 4 times multiplier gives loan of 185000. Property value for 90% loan 205600. Current savings of 5% - say 10300

I would say you are rather marginal for what you want to do. Many couples get into trouble when they have the biggest mortgage they can find and a small deposit. It means that if you need to move, but the value of your house is not sufficient to pay off the loan, then you can't.And a big loan does cut down the wiggle room to save your way out of the situation.

I would suggest to keep saving until you can get to about 12.5% deposit. House prices are unlikely to go against you - and are more likely to run slightly in your favour. So no rush.

somethingcorporate

<snip>

I would suggest that perhaps you lower your sights a little, you will be stretching yourself quite far on those figures. There are a lot of other costs to consider when purchasing compared to renting which could easily swallow half of your "buffer".

You both make less than average salaries so as a FTB aiming for an "average" house does not make much sense, especially when you only have a tiny deposit.

callmechar

somethingcorporate wrote: »

Spam on the last 2 posts!

I would suggest that perhaps you lower your sights a little, you will be stretching yourself quite far on those figures. There are a lot of other costs to consider when purchasing compared to renting which could easily swallow half of your "buffer".

You both make less than average salaries so as a FTB aiming for an "average" house does not make much sense, especially when you only have a tiny deposit.

Ha...i do not think we have less than average salaries!