How much can we borrow?

Dean_j_2

Morning all

Me and the missus are looking to buy a property in the next few months. We already have a mortgage on a flat which doesn't have any money to take out of it, so we are seeking consent to let it out on the grounds it doesn't have any equity to take out of it, and we've outgrown it as a family.

I made just over £43.5k this tax year gone, and the missus around £4.5k (couple nights a week up the pub).

I did want to use up her tax allowance, but I'm worried I won't be able to borrow as much. Do they not count both of our wages together?

If both of our wages are not counted as one, regardless of who earned what, I won't use any of her allowance so we can maximise what we can borrow. Just seems a shame to waste it.

With our current mortgage, our monthly outgoings are around £1400, with no car finances etc. just the usual car/home/pet insurances etc.

Our earnings above are before tax (hers of course doesn't get taxed)

Any opinions welcome

Cheers

betmunch

Her tax allowance wont impact on the new borrowing. I assume you bring it up as youre expecting to make a profit on the let property?

Go on to the lenders website you want to use and do their affordability calculator to find out what the will consider lending.

If you dont know what lender you intend to use book an appointment with a local broker who will work out the lender and maximum borrowing available for you

TravelBugHappy

Your post is a little unclear but if your referring to the new married couples tax break then this is not available to higher rate tax payers - which you are

Dean_j_2

Cheers for the reply Betmunch

Using up her allowance was purely for tax reasons. The rebate I get will go towards the deposit we're working towards. It's a balancing act between maximising my rebate for the deposit, and showing the best income I can for the mortgage.

We don't know who we would use at the moment, so I suppose speaking to an advisor would be the best bet. I just don't want to bother someone we might not use for a while yet.

Any other opinions welcome

Dean_j_2

TravelBugHappy wrote: »

Your post is a little unclear but if your referring to the new married couples tax break then this is not available to higher rate tax payers - which you are

I'm running a limited company and would like to pay my wife a wage (as she does do plenty for me) to take her up to the tax allowance, and get rid of some from myself. If me and the wife earned a combined 48k, would me earning 43 and her 5 be the same as me earning 38 and her 10 in the eyes of the mortgage lenders?

betmunch

I dont think you would be wasting anyones time just because your sorting it out early.

You've just added in that you run a limited company, tjis adds another level of complexity to the case.

If anything I would expect it would help things to get advice now, that way you can plan better knowing your full situation has been assessed.

Dean_j_2

Thanks Betmunch

I'll see if I can get some advice before I sort out my taxes. I don't want to shift any money from me to the wife if it affects what we can borrow.

Just been messing a of with a couple mortgage calculators and our combined wages seems to cut it fine with how much we can borrow to the house prices we have around here (Essex). Could really do with a little price crash!

Thrugelmir

Dean_j wrote: »

so we are seeking consent to let it out on the grounds it doesn't have any equity to take out of it, and we've outgrown it as a family.

That's all very well. However doesn't address the issue of how you financially exit the property. Nor it's potential impact on your longer term financial security. Irrespective of what a mortgage lender thinks. This is your problem to resolve.

Dean_j_2

Thanks for the reply Thrugelmir

I'd like to rent the place out for a couple years and hopefully re-evaluate then. Hopefully itll make some sort of equity in this time. It's a new build which is having some problems rectified as we speak. Some serious problems at that! I'd love to keep it as a nest egg, but I'll cross that bridge when we come to it.

amnblog

The property to be let can cause a problem with the new purchase in some circumstances.


My general rule with clients is never make business decisions (in this case income and tax) based on what you think will help you get a mortgage.


Make the right decision for your business, then have a mortgage broker sort the mortgage for you.

Dean_j_2

Thanks for the reply Amnblog

I see exactly what you're saying. I could do with a decent rebate this year to bump up our deposit, and paying my missus is a good way to do that. The problem lies when the lenders take our affordability. If they don't take our wage as a collective amount regardless of who earned the most, and do it as X amount of mine, and one of the wife's, then using up her allowance will make my wage too small to afford a house around here.

I've already got a headache thinking about this!