Income / Mortgage Ratios

dezzy1

A friend of mine recently picked up a £350k mortgage (not a first time buyer) at around 8 times his income... much more than the usual 4-4.5 times I'm told I can get as a first time buyer.

He says a broker got it for him and although it's not a bargain interest rate he's able to make the payments, pay for his bills/usual expenses and is still able to save a small amount.

As a first time buyer could I get a similar mortgage and more importantly - should I try to get it? I need £250k at around 7 times income and worked out I would have enough to cover a few% future interest rate rise too.

JustinR1979

You would still afford payments at 7%?
Think I would get somewhere more modest, hammer the overpayments for 5 years fixed rate, and look when term is up with a much better LTV, and going by the interest rates at that time.

dezzy1

JustinR1979 wrote: »

You would still afford payments at 7%?
Think I would get somewhere more modest, hammer the overpayments for 5 years fixed rate, and look when term is up with a much better LTV, and going by the interest rates at that time.

You're right about the rate, that's my main stumbling block (and the reason I wrote "a few%" ). That's the risk I need to think about I guess. The LTV is ok for this actaully as I've got a decent deposit, but I can't see myself finding a place I want at 4.5 time my income even if I'm flexible.

Thanks for the advice though.

Thrugelmir

dezzy1 wrote: »

A friend of mine recently picked up a £350k mortgage (not a first time buyer) at around 8 times his income...

If it sounds too good to be true then it probably is

dezzy1

Thrugelmir wrote: »

If it sounds too good to be true then it probably is

Fair enough :cool:

But the way I'm looking at it is it's not a "stupid" amount I'm looking to borrow (or my friend has). It's just a riskier amount than at 4.5 times but income would more than cover the current payments, living expenses etc.

So maybe it's not in fact too good to be true? It's just riskier for me and the lender - although they'll have a favourable LTV to cover so just me

ACG

It is possible to get mortgages at 7-8x income. But the rates are about 7-9%. They are second charge loans usually.

The only exception to that would be if your mate has been doing something dodgy.

The rules of 4-4.5x income are there for all buyers, not just first time buyers. But they only exist for regulated loans. Second charges do not fall into that category.... yet.

dezzy1

ACG wrote: »

It is possible to get mortgages at 7-8x income. But the rates are about 7-9%. They are second charge loans usually.

The only exception to that would be if your mate has been doing something dodgy.

The rules of 4-4.5x income are there for all buyers, not just first time buyers. But they only exist for regulated loans. Second charges do not fall into that category.... yet.

Thanks for your reply!

I'm glad at least it is possible to get 7-8 times income - whether he has done somthing dodgy I couldn't say. The thing is I've calcuated my finances using around the rate you've mentioned and woud still be ok - until the rate increases significantly.

It's all about risk for me and the lender I know but I must say 4-4.5 times seems simply too conservative as a blanket ratio. People spend/save vastly different amounts of their income.

Out of interest what is the highest ratio of income do people get (at any rate)? Or that you have seen?

ACG

The heighest income multiple I have done was about 6.2x income. But that would not be possible now with the lender following the recent affordability models.

Although he did have evidence that over the coming 3 years his wage was going to increase significantly with his employer.

dezzy1

ACG wrote: »

The heighest income multiple I have done was about 6.2x income. But that would not be possible now with the lender following the recent affordability models.

Although he did have evidence that over the coming 3 years his wage was going to increase significantly with his employer.

Interesting, I wonder if I could reason for higher future expected profits as I'm self employed. I need to get these ratios increased somehow because I don't want a "dodgy" mortgage and I refuse to show fake income when I can afford it on my real income (and the fact that it's fraud of course lol).

The battle begins... :rotfl:

ACG

No, self employed is based on your last 1-3 years accounts.
Unless you can show contracts which confirm your income will be higher but even then you are going to find it difficult to get a lender onboard with that. Certainly not a high street lender.

stephenni1971

So you're a self employed first time buyer looking for a mortgage of 7 x income?

Good luck with that.