Affordability and Government Equity Loan Mortgage question

millington_2

Hi,

I have some questions if anyone is able to advise please. This year I hope to apply for a government equity loan, on the website it states "buyers cannot use the scheme if they require a main mortgage more than 4.5 times their annual household income".

1) Does this mean (for example) if I want to purchase a property for £300k and have a deposit of £15k, equity loan value is £60k so mortgage amount is £225k, that the £225k cannot equate to more than 4.5 times annual income?

2) when applying for the mortgage my idea is to have no debts at all, however, I am considering a car purchase of around £5k. Rather than using my savings and keeping them to use for the deposit, could this go against the application? Would the mortgage lender deduct £5k from our annual income before working out salary multiples?

Many thanks

kingstreet

Yes.

No. Affordability would be affected by the monthly cost of the loan, not how much you borrow.

Get a copy of the Government's HTB calculator spreadsheet and try different lender affordability calculators with and without the car finance. Beware - many lenders want you to add 3% or 4% of the equity loan as an expense if HTB isn't specifically mentioned.

millington_2

Thank you very much for replying.

Would the 3 or 4% be of the £60k? So I'd have to add £2400 per annum to my outgoings? Thanks

kingstreet

Yes. 3% or 4% of the equity loan.

So, £60.000 x 3% would be £150 a month on top of your car finance in the credit commitments box where the lender calculator doesn't mention it elsewhere.