Bank has agreed mortgage in principle, but seems unaffordable to us!

Thrugelmir

Wizzbang wrote: »

I thought they were trying to be responsible lenders,

As per my earlier post. Lenders will perform an affordability check. As peoples circumstances do differ. What is essential to you may not be to some else as budgets differ widely.

If you apply as a joint couple on a sole income. Then the likelihood is that £79k won't be on the table as an offer.

Wizzbang

Hopefully then we will be approved for around a £40,000 mortgage as that's what I feel is affordable for us, both now and if interest rates rose to 7%.

Unless we are to go without a telephone or heat or light, there isn't anything else to be trimmed. Our 1 extravagance in life is 2 cats, but they are not going anywhere.

getmore4less

ACG wrote: »

Thats less than 4x income.
You genuinely dont believe you could afford that?

If thats the case I would say your probably not living as frugally as you believe you are? Not that you should have to live on a shoestring, but if you can not afford an £80k mortgage over 25 years at 14% LTV there is something amiss.

One clue is the 14%LTV £80k mortgage potentialy suggests a house that is more costly(bills CT etc.) than someone on £20k would normaly have.

ViolaLass

I don't get the problem. Don't want to borrow the full amount you could? Then don't!

Zoology_Dragon

I'm a bit confused too, our AIP told us we could borrow up to £320k, we didn't fancy those repayments in the slightest so we're borrowing (hopefully!) just over £150k. It's a guide to what you could potentially borrow, not a target that you need to aim for though it does sometimes seem that people get their AIP and set out to find the most expensive house they can within the limit of their AIP.

kingstreet

Using 2.2% per annum and a 25 year term, the rate per £1,000 borrowed on a repayment mortgage is £4.3366.

Take the amount you would feel comfortable paying each month and divide it by £4.3366. This will tell you the amount you should borrow. Add to that your deposit and the total will tell you YOUR maximum affordable purchase price.

For example, if you feel £300 per month comfortable, divide that by £4.3366 and you will see your maximum mortgage should be £69,178. If you have £10,000 deposit, your maximum purchase price would then be £79,178.

You're welcome. Some tricks from the 1980s still have a shelf life!

If you want to work out what you would feel comfortable paying assuming a rate of 7% per annum, the rate per £1,000 over 25 years is £7.067.

Thrugelmir

Zoology_Dragon wrote: »

I'm a bit confused too, our AIP told us we could borrow up to £320k, we didn't fancy those repayments in the slightest so we're borrowing (hopefully!) just over £150k. It's a guide to what you could potentially borrow, not a target that you need to aim for though it does sometimes seem that people get their AIP and set out to find the most expensive house they can within the limit of their AIP.

Not helped by the abnormally low level of interest rates. As borrowers will naturally be optimistic that there mortgage will be still be affordable in 5 to 10 years time. Whereas regulation is forcing lenders to be more restrained in their decision making.

katejo

Wizzbang wrote: »

Hopefully then we will be approved for around a £40,000 mortgage as that's what I feel is affordable for us, both now and if interest rates rose to 7%.

Unless we are to go without a telephone or heat or light, there isn't anything else to be trimmed. Our 1 extravagance in life is 2 cats, but they are not going anywhere.

I have never had a mortgage more than 3 x my income. In 1993 i got my first one. I was earning 14K and got one for just under 40K. That was perfectly manageable. Later on a salary of about 26K, I got a mortgage for 68K. The lender was actually prepared to lend me up to 120K (rates then 6% during the boom) but that horrified me and I stuck to 68K.

pcgtron

You're not living frugally if your essential outgoings each month without the mortgage are 1000.

Wizzbang

pcgtron wrote: »

You're not living frugally if your essential outgoings each month without the mortgage are 1000.

Really? What are yours and where do you live? I have filled out a spreadsheet and I can give you the breakdown- you'll see there's nowhere we can save. Actually we are £900 and something, not exactly £1000 but not far off and this assumes no unexpected bills for emergencies/ Plus, this will rise when we have a detached house, in a different area and the rates are more. So £1000 will be pretty accurate. And I know I'm getting the best deals for me, because I shop around, use cash back etc for absolutely everything! Plus you have to bear in mind that you could have the cheapest insurance out there, but if it doesn't give you the level of cover you need it's good for nothing.

Some examples are;
Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 138
Electricity............................. 45
Gas..................................... 30
Oil..................................... 0
Water rates............................. 15
Telephone (land line)................... 21.39
Mobile phone............................ 12
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 20
Groceries etc. ......................... 120
Clothing................................ 2
Petrol/diesel........................... 120
Road tax................................ 11.66
Car Insurance........................... 41.66
Car maintenance (including MOT)......... 41.66
Car parking............................. 2
Other travel............................ 10
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 25
Buildings insurance..................... 220
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 3
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 926.49