High single income mortgage

lumscx

My DH is breadwinner (permanent job in London) with approx 5000 take home pay per month. We have 2 young age DC and I'm a homemaker who provides care to them. Current mortgage is about 900 per month and we can still save around £1600-2200 per month.

We are thinking about moving to a bigger home with a bigger size mortgage, that would mean a mortgage amount of 4.4x of DHs gross income and £2100 monthly mortgage bill., the LTV is about 65%, base on how much we are saving per month right now do you think we are actually "affordable" from the lenders prospective? Do we get a chance to get a mortgage of that size for my DH with 3 dependents?

Looking forward to your inputs.

kingstreet

Input the details in different lenders' online affordability calculators and see the results.

lumscx

thanks for the reply. I just tried about 5-6 different affordability calculation page provided by different banks. Looks like half of them can offer what we would like to borrow as maximum (or close to maximum) so does it mean that we stand a chance?

Also would we be able to apply for the maximum borrowing value first and then if the underwriter not happy with that we can still lower to the value we can afford during the process?

Thrugelmir

lumscx wrote: »

Also would we be able to apply for the maximum borrowing value first and then if the underwriter not happy with that we can still lower to the value we can afford during the process?

That would mean changing the offer on the property. As your need to apply for a mortgage on a property. Not speculatively beforehand.

kingstreet

You will be able to get an agreement in principle for the maximum you can borrow, then ski downhill to your eventual purchase price and mortgage amount.

A broker will advise you on the more generous lenders and combine that with the products which best suit your circumstances.

lumscx

Thrugelmir wrote: »

That would mean changing the offer on the property. As your need to apply for a mortgage on a property. Not speculatively beforehand.

We found a property and offer accepted. So mortgage application is associated with the property, however we also want to maximize the borrowing potential so that if the bank is willing to lend as maximum indicated in the agreement in principle it would be the best, but if not we are also ok to borrow less but provides more deposit,so how does it work in the actual application process to reflect this strategy?

daisyfrau

My understanding is that when you get your agreement in principle it should say what the maximum the bank would lend you (IN THEORY). This gives you an idea of the max value of house you can purchase/offer on. You'll only know for certain if that's the case when you apply for the mortgage. If they won't give you the full amount then, they may give you a revised offer, asking you to, say, increase your deposit by a certain amount, or they may decline you outright, but they would explain why.

You don't need to have an offer on a house to get an agreement in principle. You do need to have an offer on a house to apply for the full mortgage. As you've already made an offer, the AIP step would be just a formality/cursory affordability check (I.e. you wouldn't be using it as a guide for your offers) and once you got the AIP, assuming it's for as much or more than you needed, you would then immediately proceed with the full application.

Someone in the know: please correct me if I'm wrong!!

lumscx

Thanks. I guess my question is:

Would it be higher chance to be decline outright by applying mortgage amount for the maximum according to the agreement in principle compared to a slightly modest mortgage value? given the LTV% is on the same bucket of the mortgage product?

daisyfrau wrote: »

My understanding is that when you get your agreement in principle it should say what the maximum the bank would lend you (IN THEORY). This gives you an idea of the max value of house you can purchase/offer on. You'll only know for certain if that's the case when you apply for the mortgage. If they won't give you the full amount then, they may give you a revised offer, asking you to, say, increase your deposit by a certain amount, or they may decline you outright, but they would explain why.

daisyfrau

I'm not 100% sure exactly what you're getting at (what do you mean by 'bucket of the mortgage product'? Are you saying applying at the top of AIP and more modestly will land you in the 65%LTV category either way. I may have misread but do you have an AIP already then? I would take the values you got on the online calculators as a guide and wait and see what you actually get when you apply for your AIP)

Applying at the top of your AIP bracket probably always does carry a higher risk of decline in theory, but if you're likely to have a 35% deposit you are likely to be favourably considered a less 'risky' lend.

I'd really recommend using a mortgage advisor so you can discuss all your concerns prior to applying, get an idea of your chances of getting the figure you want, and advice on what figure to apply for based on your concerns, and to maximise your chances of getting your mortgage and minimising your hassle and pain. They're not expensive usually £300-500, and well worth it in my (limited) experience!

lumscx

again thanks for the reply.

Are you saying applying at the top of AIP and more modestly will land you in the 65%LTV category either way.

yes, DH has the AIP and now is considering a full application
and yes either the top of the borrowing and more modestly amount will fit in the 65% LTV anyway.

It is really the stress testing/affordability testing worries me, currently we have a large amount of disposable income every month (as i mentioned above), so we either save it or spend it very comfortably, but that also means a larger than the usual essential spending pattern. Part of the purpose for us to decide moving house and taking a larger mortgage is to 'force' us into a regular saving behavior via paying the sum of income back to the mortgage, but just wondering how the lender actually view from the affordability point of view?

getmore4less

Start budgeting with the plan of where you will be spending you money for the next year at least (5y plan is better).

Use the last 12months as the template for the future.

the best format for here is the SOA if you want help with adjustments
just doing a budget will help get round the

so we either save it or spend it very comfortably, but that also means a larger than the usual essential spending pattern

create a proper plan for how you want to spend the money.

BY doing a last years SOA and the one you will need to live on when the mortgage goes from £900 to over £2000 will help identify where that extra £15k per year will have to come from.

http://www.stoozing.com/calculator/soa.php

Do last years spends anyway it will be an eye opener, you can't plan properly till you know where your money really goes.

Working on a years worth of spends catches everything and it is much easier to see when you have yearly amounts or yearly/12 written down

remember bigger house is not just a bigger mortgage, everything tends to go up.

£5k net is around £95k(more if pensions)
4.4 is £418k over 25years

2.5% £1875pm
3.5% £2100pm
4.5% £2300pm
...

whatever the lenders will give you YOU need to be comfortable with the cost and the potential for rate rise.

Work out what you CAN afford.