Affordability Concerns

looknohands

I've sent a full mortgage application to lender and now having slight worries about affordability. We've got an AIP but when I look over my bank statements I'm worried they will look at the deposits into my savings accounts and have concerns.

I've saved my deposit of £15k over the past 6 months, however this is all for mortgage deposit purposes, after I've got the mortgage that will be £15k to use for day to day expenses, as I'll no longer be saving for deposit. I've kept my current account balance quite low because of this, around £200 - £1000 in the past few months and now worried this will look quite low compared to my income.

Will a lender consider that I've been saving for a deposit for the mortgage or will they just see the savings as a regular expense and calculate affordability based on this? The repayments on our mortgage will come to around £650 on a current interest rate, which is £150 more than our current rent, worried that my bank account looks like it can't cover this.

HappyMJ

looknohands wrote: »

I've sent a full mortgage application to lender and now having slight worries about affordability. We've got an AIP but when I look over my bank statements I'm worried they will look at the deposits into my savings accounts and have concerns.

I've saved my deposit of £15k over the past 6 months, however this is all for mortgage deposit purposes, after I've got the mortgage that will be £15k to use for day to day expenses, as I'll no longer be saving for deposit. I've kept my current account balance quite low because of this, around £200 - £1000 in the past few months and now worried this will look quite low compared to my income.

Will a lender consider that I've been saving for a deposit for the mortgage or will they just see the savings as a regular expense and calculate affordability based on this? The repayments on our mortgage will come to around £650 on a current interest rate, which is £150 more than our current rent, worried that my bank account looks like it can't cover this.

They will ignore your contribution to your savings account. You haven't spent it. You've just moved the money from an account earning no interest to one hopefully earning some interest.

If you've really saved £2,500 per month over 6 months and paid the rent of £500 per month you've done really well and will have no issues at all passing affordability.

looknohands

Thanks, they never requested bank statements for savings. The payments on bank statements show my name and are with the same bank so I guess that will be fine, if it's queried i can easily get statements.

Just so on edge waiting for application, 100% confident I could afford repayments and can't wait to stop having to save, but always worried what the numbers look like when under scrutiny. Wish they'd hurry up and give an answer!

David_White

If anything it is a positive thing that you've been putting money into savings each month. It shows that you are responsible with your money and can budget efficiently.

Good luck with your application

looknohands

Thanks, am self employed and this year am earning a lot more than last year. So my saving and my spending on recent 3 months bank statements don't even relate at all to the 2014 & 2013 SA302 I sent for application.

I find this a bit strange with self employed mortgage, I'm being assessed on my historic income but then my historic income is being assessed against my recent spending behaviour!?

David_White

Valid point, although from a lenders perspective it is very difficult when someone is self-employed.

Seeing what you have earned previously is the best way of making an educated guess of what you'll earn in the future. This is one of the reasons lots of lenders require more than 1 years SA302's.

looknohands

Yep, being self employed is certainly interesting when it comes to mortgages!

My profit has increased 50% each year since 2011, and this year profit is 100% of last year after just 6 months, understand it counts for nout as no SA302 until April. For all they know all my gear could break before April and I'd have a £10k expense put a dent in my projection.

Just as an additional question re self employment, if I were to become a directing partner in a limited company would this have any impact on a mortgage application? Or if I were to change the structure of my company to a limited (no partners)? Am I better off waiting until mortgage is done and dusted... assume this could cause some headaches!

Verix

Changing to a Ltd company can definitely be an issue for some lenders who'd potentially want to see a years worth of figures in as the Ltd company. Maybe best to leave it till after your in the house.