Confused dot com - *Help* Mortgage eligibility calculators working??

yquestion26

Really confused about the banks online mortgage eligibility calculators and wondered if I’m doing something wrong and would love some advice.

My wife and I are 2nd time buyers in our early 30’s here are the hard facts:

*2011*
-We purchased a house for £330,000k –Greater London
-10% deposit paid into it –(£33k).So the mortgage we borrowed was £297k (less double first payment)
-Combined income back in 2011 was £95,000 per annum (Main applicant, £53k, second applicant £42k)

*2014*
-Looking at another house same area
-Our house is valued (And they are selling in the area) around £360-£370k – So expecting about £30-40k in equity
-Total amount we have for a deposit is therefore approximately £63-70k.

We have both been very fortunate to progress well in our careers – so incomes have gone up.
Total income now is £115k (Main applicant £62k, second applicant £53k)

So our income has gone up 21% in 3 years.

We are looking for a property around the value of £450 - £499k as this allows us to pay for the deposit £45k-£49k, plus stamp duty, legals, fees etc. and would still give us a bit left over.

With our “out-goings” totalling about £3,000/mth (Personal loans, travel, council tax, bills, food, socialising, holidays, shopping) and a perfect credit rating – we are left with £3,400 per mth to spend on a mortgage.

Looking at simple maths – our repayments for a house of this value (And our 10% deposit) would be £2000-£2400/mth (Which allows us a huge buffer for £1,110/mth for interest rate rises.

BUT – Going onto about 5 different banks and building society calculators, they don’t’ even want to let us borrow half that amount and none of them anywhere near what we have currently borrowed from TSB???

I think Lloyds said we can borrow £130k?? Nationwide £260k??

Are we going mad? Really worried we’ll never be able to step up the property ladder if none of the banks will let us borrow more money than have borrowed previously.

Thrugelmir

How much personal debt are you carrying?

A £450k mortgage over 25 years at 7% is around £3,200 per month. Pretty much wipes out your buffer.

yquestion26

Debt sits around £10,000 (Of which repayments are already covered in living expenses through personal loan). Based repayments over 30years by the way and our current bank is offering us more 4.8-5.5%, not 7%. We have £10,000 in savings for a rainy day as well (ISA's and savings account) and 12mths of accumulative track record of saving the difference of expected mortage repayment against current mortgage repayment. Does any of that get taken into consideration? Would it be better if we wiped out our savings to clear debt?

ACG

Banks are not assessing affordability on the repayments at 4.8-5.5% they are assessing them on what they may hit in the future. Typically this is in the region of 6-7%.

Its the amount of debt you have which is causing the problems.
You have a mortgage of less than 3x income but £10k worth of debt.
What happens if they lend you 4x income (or possibly more)....

Interest rates are at an all time low, there is only 1 direction that are going.

I think you may struggle to get what you want unless you can reduce that debt. Play about on the calculators and see what difference it makes if you knock off £3-4k of that debt but putting down £3-4k less on the deposit... ie look at the lower end of your budget put using some of the equity to clear the debt.

Thrugelmir

yquestion26 wrote: »

We have £10,000 in savings for a rainy day as well (ISA's and savings account) and 12mths of accumulative track record of saving the difference of expected mortage repayment against current mortgage repayment. Does any of that get taken into consideration?

In the broadest sense no. Lenders look top down not bottom up. Good income and personal debt raises questions of doubt. Spend today and pay tomorrow is the root cause of many a borrowers problems. As for some people every day the roof does indeed fall in. So lenders will operate a Whatif policy with the perspective of a 25 year lending term.

yquestion26

Fabulous- thank-you for the fast, simple advice it does make complete sense now and seems the game has changed a bit since our bought our mortgage in 2011 (Or it just feels that way). Thanks again!

yquestion26

WOW - Knocking 5k off one of our personal loans (dropping £200/mth payment) and jigging around a few other expenses) has almost doubled the amount Nationwide's calculator will give us.

Amazing - I never thought a 200/mth repayment for a car (on personal loan -which we can in theory pay in cash with savings) means a bank feels they should offer you £1000/mth less towards mortgage repayments, perhaps there is alot more science to this but its great advice.

Result of this - We need to talk to a Financial /Mortgage advisor to get the most out of our income:mortgage ratio.