Worried about affordability

mrs_smith_2

Hi. I was wondering if anyone could offer me some advice/reassurance. We have just had an offer of £250K accepted on a house and I am worried about the mortgage going through. We would be moving home and should hopefully have a 15% deposit. I've found a mortgage with the co-op which would be only about £70 per month more than what we pay just now if we had a 30 year term.

I earn £28.5K and my husband earns £35K and we have had a mortgage agreement in principle from HSBC and through L&C brokers. However, neither have taken into account our quite hefty childcare bill (~£900 per month). The L&C advisor said she thought it should go through and that some mortgage lenders focus more on income multiples so it was just a case of knowing the right one to go for.

So, is this correct? And would having a 15% deposit help more than a 10% deposit? It will be a push to get the 15% together but we can do it if it will make the difference. If we can get the right deal our mortgage shouldn't increase too much and we would like to get a 5 year fix so we know where we stand. Any advice would be appreciated. Thanks.

HappyMJ

The more deposit the better but then you need to make sure you have some cash left over to actually move in without resorting to borrowing money at a much higher rate such as credit cards to pay the moving bills.

ACG

That childcare cost is huge!

Ask the co-op sales person to speak to the underwriters and do an affordability check before you do an application. It might scrape through at 85%. Im not so sure about 90% but get them to check.

mrs_smith_2

I know it is huge! We could actually change nurseries if we had to had to reduce it but he is very settled there.

Thanks for both the replies. We have set aside money to cover moving costs but would have little cushion. I am just worried we will be the bad part of the chain. It wpn't be a disaster if we can't move but we could do with more space.

Guess we need to call the co-op on Monday or would there be an advantage to using a broker? We can only get the low interest rate with 15% so would try to go for that if we can.

Dave_Ham

I do not fancy your chances with Co-Op, just a gut feel.

I would also take some formal advice on 85 and 90% deals on a 5 year fixed being best advice for you. Not saying it is not, just would take some advice.

Do check with lenders about ages and terms, as not all lenders offer 30 year terms to specific ages and also professions to ages.

kingstreet

Do you have any credit commitments, or other costs, such as maintenance?

Your incomes, net of the childcare cost, indicate a maximum mortgage of £210k based on 4x joint income. This will be at the top end of what's possible from the lenders you mention.

If they'll lend you that, you'll need £40k deposit, or an 84% loan to value.

Nationwide indicates a maximum loan of £166k using its affordability calculator. Try your lender shortlist's affordability calculators online to see how the maximum loan figures are impacted by the childcare costs. Don;t forget to take into account any other credit commitments which will continue beyond your move.

If you do not disclose the childcare cost and the lender finds it on your bank statements...

mrs_smith_2

Thanks again for the replies.

We're not trying to hide the childcare costs. I phoned HSBC to ask them about how much we can borrow and they went through the loan agreement in principle and said we could borrow £250K with a 10% deposit. I said at this point that they hadn't asked about our childcare costs and asked about the impact and was told they couldn't tell me until I had made a full application. I then looked at the online calculators and started to think we wouldn't be able to borrow what we need.

I thought then I would phone a broker and explained all our costs to the lady I spoke to and she said she thought that we would be able to find a mortgage despite our large outgoings. We've gone ahead and made an offer based on this but I am really nervous now about whether it will be possible.

I guess we're just going to have to go through the application process and see what happens. It won't be the end of the world if we can't move though it will be disappointing. I just want to know quickly so we can let everyone else know. We have been really open about our costs though when we've looked into this.

mrs_smith_2

I still have an old style student loan of about £100 a month but we have no other debt apart from this.

ACG

How much longer will you be paying those childcare costs for?
If were talking till September then it might not be a major issue if you were to appeal any negative decision.

mrs_smith_2

More like 3 years! I feel bad if we are wasting everyone's time but we are acting on the advice we were given.....

The co-op wasn't mentioned by l&c but I was hopeful we could get the bette rate if we had 15%. To me it seems affordable if it is only a bit more than we pay now but I know lenders don't work that way.

GMS

Who did L&C recommend?