If I can afford rent how come I can't afford mortgage?

extrastrongbint

Hi there!

I'm a newbie so please be kind....I currently find myself in an incredibly frustrating position and wondered if anyone had any ideas?

In about three months time I am intending to get myself on the property ladder. My problem is that although I am able to afford rent of £500 per month currently and a credit card of minimum payment of £100 per month (which incidentally will be entirely paid off before I purchase a house) I am still unable to get a mortgage because I have a low salary and am on my own.

I earn £18,000 per year and even the highest income multipliers don't cut the mustard. I am obviously not looking at buying a mansion but where I live even a flat costs £120,000.... obviously I know I can afford repayments of £600 per month and can prove it with my current situation but I can't find a mortgage lender that would even look at it.

Does anyone know of any mortgage company that actually looks at how much you can afford!;)

Melissa177

HSBC work on the basis of "affordability". They say that your monthly outgoing costs should not be more than 60% of your income. I'm not a big fan of HSBC mortgages (rates are a bit higher than the best deals), but they do work on an affordability basis.

Also, try Scottish Widows, esp if you're a graduate.

Do you mind me asking if you have a deposit and/or if you could find a property a bit cheaper to get on the property ladder?

thesaint

I believe that Nationwide do.
Post on the mortgages and Endowments board where more Mortgage advisers lurk.

UK007BullDog

Yes there are but you need to also have the income. They firstly look at your income and then look at affordability.

You would need to see a couple of independent brokers to give you an idea of how much you can afford to pay.

For instance a £120000 mortgage is interest only at a rate of 5.5% is £550 per month. However your income only lets you borrow up to £72000. Catch 22 situation.

So yes you have only a few options:

1. Shared ownership
2. Buy with someone else
3. Find a high deposit
4. Increase your income
5. look in cheaper areas

Sorry to be so doom mongering but the figures are the facts.

dmg24

I got mine based on affordability with A & L, but the most they would lend me on a £20000 salary was up to £96000, and that was with a £25000 deposit and no other liabilities.

extrastrongbint

Hi

I don't have a deposit (£600 per month expenditure doesn't allow a lot of room for saving) although I am trying! and unfortunately where I live and the surrounding areas the average house price is 10 times the average salary! Arghhhhh!

Generali

The reason nobody will lend you £120k for a flat is simple.

According to this, you earn £1170.76 per month. At 6% over 25 years, the mortgage costs £782.26 leaving you less than £400 for council tax, bills, repairs, food etc..

If you can't afford to save when you pay £600 in rent, how will you manage to pay the extra £200pm for the mortgage? And find the money when the boiler breaks down.

It is really frustrating, especially when we're constantly told on the TV and in magazines and newspapers that you've got to get on the property ladder before it's too late and all that guff. Work hard, get a deposit and some payrises and then buy when you're ready. Don't overstretch youself and get reposessed.

garagemc

Looks like the general consensis is to wait until you have some more money coming in.

extrastrongbint

Generali wrote: »

The reason nobody will lend you £120k for a flat is simple.

According to this, you earn £1170.76 per month. At 6% over 25 years, the mortgage costs £782.26 leaving you less than £400 for council tax, bills, repairs, food etc..

If you can't afford to save when you pay £600 in rent, how will you manage to pay the extra £200pm for the mortgage? And find the money when the boiler breaks down.

It is really frustrating, especially when we're constantly told on the TV and in magazines and newspapers that you've got to get on the property ladder before it's too late and all that guff. Work hard, get a deposit and some payrises and then buy when you're ready. Don't overstretch youself and get reposessed.

Thanks for this but I am intending on an interest only mortgage over 30 years (I am only 30). And I would have a lot more money to save but in my rented flat the boiler is currently so inefficient that is costs £100 per month in gas! Plus my council tax is nearly £100 per month! I have also owned two properties in the past and not overstretched myself. Stuck between a rock and a hard place!

dmg24

You are in the same position that I was in, it's a nightmare. Is there anybody that could help you with a deposit, or are any developers offering shared equity in your area?

These are the two options I narrowed it down to, had everything arranged to go with the shared equity scheme, but then my parents offered to pay my deposit. I would rather the increase in value would go to them than the property developer! x

Melissa177

I have a can-do approach to approach to property - I don't like being told I couldn't do something, so I worked out how I could do it.

Decide what you want, and how much money you need to do it. A 5% deposit on a 120K property is 6K. So, think, how am I going to get 6K?

You could earn it - get an extra evening/weekend job and put all that money into your "deposit savings" account
You could sell items you no longer need to raise the cash
You could loan the money from a friend or relative (perhaps offering them a return on their "investment")
You could use a skill that you have to make money - perhaps you could tutor pupils if you have specialised knowledge of a particular subject.


Read "The Rules of Wealth", which is in most book shops at the moment; this might give you some ideas as well.

You will need to earn more also, I expect - so think about how you can increase your salary.

Good luck! Remember, lots of people are very rich who have come from very humble circumstances. Money does not discriminate - you can be very wealthy too if you put your mind to the task.