Income Multiples For Single Mortgage Applicants

TCA

I understand lenders now take account of expenditure as opposed to previously lending based on multiples of income, but do individual lenders still have caps on the income multiplier they'll lend out?

I just received a (single applicant) mortgage decision in principle from my own bank which equates to lending of 4.6 x my average income, which seems pretty good to me, so wondering (very generally), how this would likely compare to what other lenders might offer?

I'm bearing in mind this is my own bank who have full knowledge of my income and expenses for the last 25 years and have accepted 2 years of SA302s, where other lenders might not.

I appreciate all lenders work differently, so just after a rough steer as to the lending criteria of the majority and whether there's much to gain by going down the broker route.

kingstreet

At a lower loan to value, with no dependents, credit etc and not using a Government scheme, you can get 5x income with a term longer than 20 years.

You may also get it based on latest year, not an average.

HappyMJ

If you earnt a lot of money you could commit more to a mortgage each month but there is still a limit on how much of your disposable income can go on the mortgage payment. They will not lend to you and allow you to have 100% of your take home pay go on mortgage payments no matter how much you show how little you spend. You could borrow 6 or even 7 times your income if you have enough spare income. You would need to extend the loan term to 40 years but not past 75 years of age. You could make part of the mortgage interest only which will qualify you to borrow more....but you'll need an investment to be able to pay it off such as a pension but increasing your pension contributions reduces your take home pay so you'd qualify for less. If you had to save into an investment product they'll take that contribution as an expense so you wouldn't get much more.

TCA

Thanks to both for the replies. The mortgage in principle (from RBS) is based on a 60% LTV, no dependents with an 18 year term, seeing as I'll be 47 this year and presumably taking into account monthly repayment affordability. My intention is to repay in full in 5-10 years and probably make use of an initial fixed rate deal. I have the cash to do so.

My earnings dropped last year and will (if anything) drop again this year, so the 2 year average is probably the best I'll get. I don't have much spare cash each month but have healthy savings.

So based on my circumstances and the replies above, it wouldn't appear that the amount I can borrow would be materially increased by using a broker to do the rounds of different lenders. Stretching the multiple to 5 times wouldn't make any difference to me. Increasing the term would decrease monthly payments but if my intention is to pay off the mortgage relatively quickly, then the benefits are probably minimal.

My decision therefore might be down to the deals that RBS offer. Unluckily for me, RBS fixed rate deals appear to have been changed upwards in the 24 hours since they gave me their decision in principle. Just looking at their 5 year fix - now 2.23% with £995 fee or 2.9% with no fee, reverting to 4% thereafter. Looking solely at 5 year fixes - Chelsea, Nationwide, Post Office and Yorkshire all have marginally better rates, albeit only Nationwide has a better subsequent rate than RBS.

Before I go mad with the calculator and looking to save a few points in interest over the RBS offer, do I assume I'd get an equivalent borrowing amount from the main lenders or can I rule some out based on my circumstances? I tend to think the RBS offer is good because they have 25 years of my credit history and I have apparently a high credit rating with them.

HappyMJ

If you want to qualify to borrow more you have to extend the term. You can pay it off quicker though nothing is stopping you from paying it off in 10 years instead of 28 years your maximum term for your age and with the right lender.

You generally can't overpay much in the fixed term but you can usually find that savings rates sometimes exceed interest rates of short fixed term mortgages so you'd be better off saving the money instead and at the end of the fixed term just pay off a lump sum.

They only look at the last 6 years of your credit history. Being with the bank for 25 years makes little difference. Actually new customers tend to get better deals rather than the existing customers so shop around.

TCA

Thanks again for the reply MJ

HappyMJ wrote: »

If you want to qualify to borrow more you have to extend the term..... 28 years your maximum term for your age and with the right lender.

My quandary is whether it would be substantially more and at materially better rates (than RBS) and whether this would actually be achievable in my circumstances. Having been out of the UK since 2007 and returned in 2013, there's not much recent credit history and only 2 years tax returns.

HappyMJ wrote: »

you can usually find that savings rates sometimes exceed interest rates of short fixed term mortgages so you'd be better off saving the money instead and at the end of the fixed term just pay off a lump sum.

This is partly my thinking. Plus I'd prefer to have access to at least part of my savings for another few years, without necessarily needing it, so a mortgage makes sense.

HappyMJ wrote: »

They only look at the last 6 years of your credit history. Being with the bank for 25 years makes little difference. Actually new customers tend to get better deals rather than the existing customers so shop around.

As said above, I don't have much of a recent credit history. By a strange quirk, because of its age, my 25 year old RBS credit card info isn't released to the credit agencies. Having never defaulted and always paid balances in full very month, I thought about requesting the release of that info but apparently it might appear as a new line of credit, so that idea was canned. RBS obviously have access to that "good" credit history, which is why I thought their offer might be more favourable than other lenders. Maybe not though.

TCA

I've set up a spreadsheet comparing my favoured mortgage (5 year fix at 2.23%, £995 added to borrowing) based on my decision in principle from RBS, with some of the best deals from the main lenders.

Looking purely at the 5 year fixed rate period, after which I plan to repay in full, there are products from Chelsea, Yorkshire and Nationwide that might save me about £1,000 over that time frame. I've incorporated product fees, processing fees, redemption fees and cashback where appropriate, but am going round in circles on the lender websites trying to get a handle on anything else I need to know.

Can someone in the know (a broker?) please give me a steer on the following:

1) Valuation fees and legal fees - do any of Chelsea, Yorkshire or Nationwide offer these free?

2) Are they any other costs I need to consider which will significantly differ between lenders?

3) If I was to make online applications for an Approval in Principle from any of the above, do they make "soft" or "hard" credit checks?

4) Or am I wasting my time applying to any of those 3 lenders because I only have 2 years SA302s? Are there any other lenders I should consider?

Thanks in advance.

TCA

TCA wrote: »

Can someone in the know (a broker?) please give me a steer on the following:

1) Valuation fees and legal fees - do any of Chelsea, Yorkshire or Nationwide offer these free?

2) Are they any other costs I need to consider which will significantly differ between lenders?

3) If I was to make online applications for an Approval in Principle from any of the above, do they make "soft" or "hard" credit checks?

4) Or am I wasting my time applying to any of those 3 lenders because I only have 2 years SA302s? Are there any other lenders I should consider?

Thanks in advance.

Just bumping up the thread in case anyone can offer any guidance on any of the above points.

amnblog

Given the amount of queries you have, you should be using a broker.

TCA

amnblog wrote: »

Given the amount of queries you have, you should be using a broker.

From what I can see there are only the 3 lenders I mentioned above that can compete with my own bank's offer. I'd rather not start the broker process to be honest as I'm pushed for time, so was hoping on a very quick steer as to these lenders.

e.g. Several posts on here have said that Nationwide and Yorkshire are difficult to get offers from. I just want to know from the perspective of 2 years SA302's (everything else being equal) whether Nationwide, Chelsea or Yorkshire would entertain me.

If someone can just tell me on what basis they evaluate income, then I can rule them in or out. If they need 3 years or just use current year, then that's no good. Anyone?

somethingcorporate

It's a big risk for the sake of £1k. Use a broker or play it safe and go with your own.