Affordability worries!!!!!

cupcake2014

Hi all,

Me and my partner are looking at getting our first mortgage soon, using the help to buy 20% equity scheme.

What I want to know is what sort of questions do they ask regarding your outgoings? And do they need to know current outgoings as some of the bits we have we wont have by time we actually move in anywhere? Also, do they check bank statements as I am hearing different things from different people!

I have also been told that the broker will ask you things like ''how much would you spend on haircuts/colouring per month?!'' It just seems crazy as a lot of it you cant even put a cost against??

Is there a certain criteria or limit of outgoings which lenders have based on a combined income of £40,360? We are looking at a house for £240,000 on the help to buy scheme, 12k deposit. When we spoke to the developers broker, they said on our income and outgoings (as in direct debits only, not shopping/fuel etc) that we can look up to £240k (180k mortgage). Does this seem right? I am just a little confused as the 'santander for intermederies' affordability it came up saying we can only look up to £155k?!! Bit of a difference?!!

Why dont they do the affordability checks beforehand as we have already been told we can afford the mortgage repayments by the broker? However I guess that was merely a 'qualification' calculation...... <spinninghead>

Sorry to babble on, we just really want everything to go right and there always seems to be some hurdle to overcome!!

Thanks x x

Thrugelmir

Lenders have the responsibility of assessing affordability. A regulatory requirement under the new MMR rules. Though lenders will use different ways of assessing affordability.

I have also been told that the broker will ask you things like ''how much would you spend on haircuts/colouring per month?!'' It just seems crazy as a lot of it you cant even put a cost against??

If you don't learn to budget how will you manage your money? Particularly with a sizable mortgage that will feel like you are carrying a ball and chain for the foreseeable future. More so if interest rates rise progressively in the years to come.

breakingbad

I would think that on a combined income of £40k, a £180k mortgage is pushing it a bit - that's over 4x joint salary! And even if you do get approved, if interest rates rise (which the are likely to), your repayments will rise massively. Do you really want to push yourselves so close to the edge, so to speak?


Off the top of my head, a £180k mortgage over 30 years, at 2.5% you'll be looking at £700+/mth, if interest rates rise just 1.5% to 4%, you'll be paying £850+/mth.

amnblog

The law changed two months ago and Lenders will now check everything in respect of your income and outgoings to assess your affordability.

Using online affordability calculators to make your own assessment is a waste of time as it is more complex than that. Unless you know how the use the form they provide a ball park figure at best.

Yes, Lenders will check your bank statements and ask you to outline your monthly spend across the board. Items like personal care, food and entertainment they will expect to fit into a band relevant to the make up of your household. if the figures seem particularly low or high they will ask for further clarification.

The Bank statements enable them to identify if, for example, you are spending out of the ordinary such as £1500 on the National Lottery (as one of our clients was), or £200 per week gambling online (as another client was).

Common items that will affect affordability and come as a surprise to clients include:

CSA payments and maintenance
Child care costs
Pension contributions
Professionals subscriptions and fees
Student loans

On an Equity Loan scheme, your equity loan also affects affordability.

Items that influence affordability with regard to income include:

Shift allowances
Bonuses (and frequency of these)
Overtime
Car allowances

Without understanding your entire case we cannot say if a £240,000 purchase on the EL scheme is 'affordable' to you. That is a matter for you, your broker and the Lender.

Leon_W

It's funny.


I've seen a lot of these calculators now splitting out all sorts of things such as childcare, haircuts, sky, etc etc but yet to see one that asks if anyone smokes ???


A few £10 haircuts a year is asked about yet someone smoking 40 a day at £70 a week isn't ??


It's a bit of a nonsense really. If the applicant is told that because of their £70 a week habit he can't afford the mortgage what do you think will happen on the next application. Do you smoke ? No. Affordability suddenly increases by about £20k !

amnblog

A good point Leon.

Leon_W

A point I may well have to remember when I come to remortgage. Cough cough !

amnblog

How much are those electric jobs

Leon_W

All my clients are non smokers so I wouldn't know. lol .:j


But what do you reckon.


Per month average


Council Tax £120
Elec/gas/ £120
Water £ 80
Phone/Mob £ 60
= £380


All picked over with a fine tooth comb.


Fags. 40 a day £14 x 31 = £434 per month yet nobody asks.

amnblog

and they still won't take life cover!

Leon_W

If they haven't shot themselves in the foot already declaring the ciggies then adding in the likely life premiums will surely condemn them to renting for the rest of their lives.