affordability

lydriver

wondering how affordability works...

for example, if you're offered 80k loan assuming you make 20k a year
would that mean if you made 25k they'd likely offer you 100k loan?

or is it more like (again just example) they can offer you £10k for every £1k over £14k you make rather than a multiple of your entire income ?

kingstreet

It's usually based on income/expenditure entered into the affordability calculator with an overall cap of perhaps 4.5 x income, particularly at higher LTVs.

amnblog

Cap = maximum multiple of pre tax income. Often applied as a lending limit regardless of overall affordability.

Affordability = a measure of net income versus general and personal outgoings against risk of the loan

Each Lender calculates everything in their own way to keep it sweet.

ACG

It used to be that simple and I imagine some smaller lenders work fairly close to that but in the main it is a lot more complex.

One of the best examples I had was someone who could lend around £40k more if he cleared his £5k credit card balance. This was a few years back though.

Your debt, income, how many kids, any tax credits, tax rate, your commitments, term of the mortgage, how much your deposit is, your credit score and sometimes where you live play factors in how much you can lend.

Thrugelmir

lydriver wrote: »

wondering how affordability works...

Everybody has a base cost of living. Over a certain threshold, income can be spent in a more discretionary manner. Resulting in a laxer approach by lenders. Obviously a multitude of other factors could come into play which could impact the outcome.

lydriver

thanks all


want 70k loan on 20k basic wage, 90k purchase price

pay verified (wrongly) at 17k, offered 51k loan

am I likely to get 70k with 20k basic wage or will more deposit be needed?