Debt to income ratio for mortgage approval

bbmack

Good afternoon

My wife and I are applying for mortgages and have a decent enough income and have a good credit rating e.t.c. However our Debt to income is rather high sitting at just under 50%.
We were turned down by one lender due to this and our broker has said to try Nat West next.

I didn't even consider that debt to income ratio was an element but it makes sense for it to be. Does anyone know what sort of % the major banks look for when deciding on their mortgages?

I can't find anything online at all

Cheers

Simon

chelseablue

How much do you earn and how much do you owe?

kingstreet

As an example, the Government's HTB calculator for equity loan sets a maximum 45% debt to household income ratio.

ACG

Lenders vary, some lenders do not have a cap in place, others usually kick in between 30-50%. I have one going through at the minute where the debt is about 150% of the household income. I do not want to tempt fate but it looks like it is going through ok. I have done some in the past where debts are between 50-70% of the household income so they can be placed, its just options will be limited.

Did you use your broker for the original application?
Did they not pick up on this before applying?

lexia

How do you actually calculate this ratio?

Thrugelmir

bbmack wrote: »

However our Debt to income is rather high sitting at just under 50%.

To put this into context actual figures would help. For example is your household income is 50k a year and your unsecured debt £25k.

Caz3121

what deposit do you have? is it an option to reduce your debts by reducing your deposit?
What salary multiple are you looking for? your current debt will affect affordability

bbmack

We passed the affordability check (quite rigorous) but then turned down on the ratio. My broker seems quite downbeat but surely the above ratio isn't that unusual.

We have a 10% deposit with little wriggle room.

ACG

There will definitely be lenders if that is the only issue. As I said, I have examples far in excess of that. There are 3 lenders I have come across who tend to be quite good/relaxed in these circumstances...sadly I can not name them.

Your broker should really have checked but I suppose it is one of those things they will learn from.

It is a lot of debt, I would not say its unheard of to see this much but its not common. Most people have debt to some degree but its not often I seen anything more than about 25% of annual income.

Thrugelmir

bbmack wrote: »

Debt £39,454

What does the debt consist of?

What's the reason behind the high level of debt?

bbmack

Car HPI , Consolodation loan and 2 credit cards (both 0%)

It is quite a high level of debt but we have no issue with repayments, hence the clean credit history.

Even with all the repayments per month we're left with enough to comfortably pay the mortgage.