Mortgage Confusion (First Time Buyer)

DanParks87

Hi there everyone.


I'm having a bit of an issue with how the whole mortgage calculator thing works in terms of what banks/building societies are willing to lend. I'm getting completely conflicting results.


So I used the "Mortgage Best Buys" option from MSE, put myself down as a first time buyer, input my property value and what I wanted to borrow (£150,000 on a £162,000 property (which works out at about 93% LTV)) and I have LOADS of options popping up.


Now admittedly many of these say you have to call them or apply in branch, so I narrowed the results to places that had a local branch to me and then gave a couple of them a call.


After speaking on the phone and giving the same details I input online and suddenly the absolute most I can borrow is £100,000.


I try explaining to the guy on the phone that his company are telling me online that I can borrow much more than that - he can't seem to explain why and he's meant to be the expert!!


Can any of you lovely folks help shed some light? I'm becoming increasingly disillusioned.


Thanks

kingstreet

Maximum will be 4.5 x gross annual basic salary.

Some variable earnings may be taken into account depending on frequency of receipt.

You will need to take off ground rent & service charges, maintenance, dependents, childcare, credit commitments and so on.

Completing the lender affordability calculators is what we do. You need to ensure you are putting the right figures in the right boxes and a broker is your first port of call if you can't trust yourself to do that correctly.

DanParks87

Thanks for the reply.


Yes I understand that I need to take into account and monthly commitments and have actually done so. Obviously I don't understand the complete workings of a mortgage lender, but I have done a fair bit of research into my own earnings, commitments etc. and this is essentially what I've come up with:

• Monthly take home pay (after tax) = £1,500 (slightly more than this, but rounding down)
• Monthly commitments for phone, car etc. = £250
• Approx monthly payments for bills like council tax, utilities etc = £290 (I've researched local council tax bandings and rates, average utility bills and even done quotes for home insurance)

Give or take a few quid that leaves me with £960 for mortgage payments, food and fuel.


But I'm being told that I can only borrow £100k over 35 years, which is £238 per month.


I know there's probably something I'm missing, but surely I can't be THAT far out that I'm misappropriating nearly £700 per month.

glentoran99

Stress tests mean they look at can you afford it if interest rates went to 7%

Thrugelmir

DanParks87 wrote: »

I know there's probably something I'm missing, but surely I can't be THAT far out that I'm misappropriating nearly £700 per month.

In addition to the stress tests. Have you made due allowance for the all the other things that you spend money on. Haircuts, clothes, christmas, holidays, hobbies, going down the pub, property maintenance etc etc. Surprising how it adds up.

DanParks87

In addition to the stress tests. Have you made due allowance for the all the other things that you spend money on. Haircuts, clothes, christmas, holidays, hobbies, going down the pub, property maintenance etc etc. Surprising how it adds up.

It's obviously something I'd consider, but would very much be a "spend what I can afford" - they're not all 'essentials' in the same way utilities and other bills are. If I can't afford to go to the pub or play football then I won't do it. Haircuts and clothes would take priority. Birthdays and Christmas would be more budgeted than usual etc.

kingstreet

No lender uses "take home pay" they use gross annual, as I said.
You are working out disposable income etc trying to associate this with affordability and it really doesn't work.

Go here;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

Insert number of applicants - 1

Dependent children - 0

Loan amount - £150,000

Loan Term - 35 Years

Is the mortgage on any of the following - Yes (HTB MG)

Go down to gross basic salary and enter annual amount £

Put overtime bonus and commission in other boxes (for example take overtime from your latest three months payslips, average and annualise.)

Other income? Find the category and use annual amount

Credit commitment monthly payments - enter if more than six months left and not being repaid, on or before completion.

Enter credit card balances if not being repaid, on or before completion.

Hit the calculate button then tell us what you get, setting out what you have put in each of the boxes.

Forget council tax, phone etc. These are not needed.

DanParks87

Thanks Kingstreet


So I've gone through that and got the same results I was given over the phone. Max lending of around £100k


I still can't understand it if I'm honest - I know I can afford much more than that in terms of repayments - I've done it in the past when renting at £500 per month, and that was when I was earning much less.


Are there no other options available at all? So many places do 95% mortgages and the comparison sites all say "yeah we can lend you £150k with monthly payments of £670(ish)" which as far as I can tell would be fine. But then when you speak to a human it's considerably reduced.

Spangled

If your take-home pay is £1,500pm, then you're earning around £22k a year (before tax), assuming you are paid via PAYE.

Going by the rule of thumb of maximum borrowing being 4.5 times salary, then maximum borrowing of £100k sounds about right.

I would engage a decent whole-of-market broker to go through your options and to perform a proper assessment of your finances and options. Doubly so since a) you're a first-time buyer, b) looking to borrow 95% and c) pushing the maximum salary multiples.

Good luck!

amnblog

DanParks87 wrote: »

But I'm being told that I can only borrow £100k over 35 years, which is £238 per month.

That totals £99,960, is someone paying you £40 to borrow £100,000 over 30 years?

Lending is more likely to cost £400 pm on £100,000 and £600 on what you say you would like to borrow.

NOVAMET21

Sorry DanParks but the most you can borrow is about £100k as others have mentioned.
Not sure if you can buy the property with HelptoBuy scheme and will you still be able to afford it?
Normally, experts say that the mortgage amount should be about 1/3 of your monthly net pay. But obviously this is just a theory figure as each people's spending habits are different. So, according to this you are only likely to afford max £500 a month. Also you need to consider the responsibility of the home owner such as maintenance cost and other costs