Affordability?

tea_lover

I realise this may be a ‘how long is a piece of string’ question.

Is there a general rule as to how much mortgage lenders will lend (x salary)? I’m hoping to find out whether I can afford to buy out my OH, but have no idea where to start.

I could afford the mortgage on my own, but I realise that there’s a lot more to it than that.

Am also confused about how much I’d need to buy him out etc.

Where’s a good place to start please?

nobodysdriving

there is a lot more to it than that.
I don't know what they base it on but my mortgage advisor entered all my info in a programme which told him how much I could borrow.
this was FAR LESS than I was able to afford in my view.
I think this is because 'they' have other priorities than what you may have.
for example, I would much rather put my money in my mortgage than go out or eat take aways or have certain things and I also work work work.
but I guess they want you to work normal hours and be able to afford some thrills in life, as a result they allow you to spend less on mortgage repayments.

so I took out what they let me at the end which was a huge lot less and I will just pay it off in half the time.

Thrugelmir

tea_lover wrote: »

I could afford the mortgage on my own, but I realise that there’s a lot more to it than that.

People in general are overly optimistic when it comes to financial matters. Affordability is subjective. Everybody has to clothe themselves, feed themselves, pay for energy etc. Often what fees forgotten is contingency saving. Property requires maintenance and upkeep over the longer term. In the same a car does. As disposable income rises then more can be spent on housing, expensive hobbies or pastimes, or simply be saved towards early retirement. Often what fees forgotten is contingency saving. Property requires maintenance and upkeep over the longer term. In the same a car does.

Provide some numbers and the forum contributors ask some questions along with providing some insight.

tea_lover

Thanks for the replies, will give some basic numbers to see if that helps

Property cost £179,000 3.5 yrs ago
Currently worth about £200k

Paid £50k deposit (from me, not joint)
Currently owe just over £112,000

Monthly payment is £637, we pay £850. Usually make other over-payments too of around £200 a month or so.

Other outgoings (council tax, utilities, water, insurance, TV licence, broadband, petrol, food, gym, pet, etc) add up to around £700 per month.

My take-home pay is £1590.

On paper that's affordable (£1590 - £700 = £890. Mortgage payment currently £637)... but I'm guessing it's not as easy as that!

ETA: I also have approx £21k in savings (indvidual)

Dave_Ham

What is your gross salary, assuming no other ongoing credit commitments chances are this will be ok.


It will depend upon your existing lender, although if outside of any fixed rate you may be able to remortgage cost effectively.


Lastly, is your OH going to be complicit when on paper he/she will have a 50% equity stake in the property if not tied up appropriately when you bought?

amnblog

nobodysdriving wrote: »

this was FAR LESS than I was able to afford in my view.

Your view is presumably informed by the figures produced by your broker regarding initial costs on your mortgage.


By law lenders have to consider that you would find the mortgage 'affordable' if rates rise considerably. They make a submission to the regulator about how they will ensure this.


This means your 'pay rate' and the affordability calculator rate may be miles apart.


For example, one major Lender currently has a rate price at 1.49% but if you want it they will calculate whether you can afford it based on a rate of 6.99% - nearly 5 times higher.

tea_lover

Dave_Ham wrote: »

What is your gross salary, assuming no other ongoing credit commitments chances are this will be ok.


It will depend upon your existing lender, although if outside of any fixed rate you may be able to remortgage cost effectively.


Lastly, is your OH going to be complicit when on paper he/she will have a 50% equity stake in the property if not tied up appropriately when you bought?

Gross salary £25,500. No debts other than mortgage.

We're about half-way through a 2yr fix, that ends start of Oct 2015.

The last one.... who knows! I didn't get things tied up properly when we bought the place (I know, it was stupid and it was unlike me but the whole thing had been dragging on for so long and I just wanted it all sorted - not a great excuse I realise).

When we bought I paid the deposit (£50k), and all the fees for buying the joint place and selling both of our individual places (including having to extend the lease on OH's flat so we could sell it). Spent about £10k on fees - OH didn't contribute at all. OH had over £20k debt which I didn't know about until after we'd moved.

I then paid twice as much into the joint account (similar salaries) for 2 yrs while OH focused on paying off debts. They have been clear for a while now.

OH has said that they want no claim on the deposit, so I'm hoping (!) I can buy them out with 50% of the equity increase. Whether that turns out to be the case is a huge unknown at the moment.

Dave_Ham

Best of luck, experience of people suggests if they are aware of the legal position they may look to exploit.


Who is your existing lender, as much will depend on who you are currently with in regards to removing a name as the salary is going to be tight on amount required.

tea_lover

Halifax. Have always been with them (for this house and the one I owned on my own for 10 yrs previously) - if that makes any difference!

Thrugelmir

tea_lover wrote: »

On paper that's affordable (£1590 - £700 = £890. Mortgage payment currently £637)... but I'm guessing it's not as easy as that!

Lenders are now required to assess affordability as if interest rates were at 7%.

As a general observation your budget looks extremely tight.

tea_lover

Thrugelmir wrote: »

Lenders are now required to assess affordability as if interest rates were at 7%.

As a general observation your budget looks extremely tight.

That was my concern. The £700 outgoings covers absolutely everything I can think of, but I guess that does only leave me with £253 to cover any potential mortgage increases.

The other option I may have is paying off about £10k of the mortgage, which should reduce the payments.... hopefully!