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Affordabilty calculations - % of overdraft and credit card

Hi, I have been talking to a couple of potential lenders re a remortgage. There seems to be a variance in their affordability calculations where some lenders will calculate a % (2-3%) of the debt and some will take the min. monthly payment, has anyone else experienced this? Is this normal?

Thanks,
KH

Comments

  • ACG
    ACG Posts: 25,087
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    Its normal in the sense that there is no normal.

    All lenders have their own methods - if affordability is tight, its a case of finding where it will fit.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • amnblog
    amnblog Posts: 12,791
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    Hi, I have been talking to a couple of potential lenders re a remortgage. There seems to be a variance in their affordability calculations where some lenders will calculate a % (2-3%) of the debt and some will take the min. monthly payment, has anyone else experienced this? Is this normal?

    Thanks,
    KH

    If you believe you have a fix on how lenders calculate affordability, think again.

    Since April it is a lot more complex than x% of y times z
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • It would be good to have a resource of each lenders formula for affordability, if nothing else it would make interesting reading!
  • betmunch
    betmunch Posts: 3,126 Forumite
    It would be good to have a resource of each lenders formula for affordability, if nothing else it would make interesting reading!

    One might almost make a profession out of it!
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • ACG
    ACG Posts: 25,087
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
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    Very few lenders release their calculations.

    It would be nice to be able to put a spreadsheet together where you put in relevant figures and then it will display how much each lender would lend - sadly that does not happen. I only know of 2 lenders where I can manually work out how much they would lend if I really wanted to.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • As above, different lenders have different calculations.

    Halifax take 5% of any credit card balance, Clydesdale Bank 3%. Clydesdale Bank however have a 'debt servicing calculation' that they run which restricts expenditure on essential commitments such as ongoing credit commitments, new mortgage, household essentials and insurances etc, to 50% of net income.

    It really isn't as easy as taking £XXX on it - most lenders have some form of affordability calculator, and you'd need to rely solely on that really.
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • amnblog
    amnblog Posts: 12,791
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
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    It really isn't as easy as taking £XXX on it - most lenders have some form of affordability calculator, and you'd need to rely solely on that really.

    Plus you need to know what goes where, and that is a science it itself.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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