Any lenders go above the 4.5 times salary cap?

watcher27

So, looking to move to a bigger property.

We have found a place and made an offer of £295K, which has been accepted. Our current house is now on the market for £260K and the estate agent says we will get at least £255K for it. We have a settlement figure of £148K on current mortgage. So that leaves us with £106K of equity after the sale.

Problem is, the house we want to move into hasn't been touched since 60's and needs a lot of renovating.

So we have budgeted £65K as deposit on new house and to keep back £41K for selling fees, clear £6K loan and renovating new house.

So ultimately we need a mortgage of £230K.

The problem is our join incomes come to £47K a year, so sticking to the 4.5x salary that most mortgage lenders use, we can only get a £212K mortgage
So we can still get the property, but would have next to nothing left for the renovations.

On paper, we can more than afford a £230K mortgage repayment. Budgeting for £1050 payment for a 25 year mortgage, after ALL outgoings, we are left with around £1100 a month disposable income.

So is there any lenders that will lend above the 4.5x cap? or who will look at our monthly expenses as a guide rather than just combines salaries etc?

Thanks in advance for any suggestions, and sorry for all the waffle

kingstreet

At under 80%, I'd expect you to be able to get 4.75, maybe 5.

An independent broker would be best bet for the options which will combine the amount you need and the best terms.

amnblog

A 4.5 times income cap applies for some lenders but not all.

It is a cap not a measure, so even a Lender offering 4.75 on its cap will not necessarily lend to a particular client at that level.

If struggling for options due to affordability a Broker is always the best option.

enthusiasticsaver

Hopefully not as that would be the height of irresponsibility and the cause of most housing crashes. If mortgage rates increase which is likely you would end up with a significantly higher monthly repayment.

Do you not have any savings to do the renovations or can they be done at a slower pace with you saving for them? If you don't have any savings it suggests your budget is not as comfortable as you say and begs the question how will you cope with a mortgage £100k higher and all the expenses which come with an unmodernised bigger property.

watcher27

enthusiasticsaver wrote: »

Hopefully not as that would be the height of irresponsibility and the cause of most housing crashes. If mortgage rates increase which is likely you would end up with a significantly higher monthly repayment.

Do you not have any savings to do the renovations or can they be done at a slower pace with you saving for them? If you don't have any savings it suggests your budget is not as comfortable as you say and begs the question how will you cope with a mortgage £100k higher and all the expenses which come with an unmodernised bigger property.

Yes, will can do the renovations at a slower pace. Id like to just be able to get the basics done, which would be rewiring and a new heating system. So realistically we would need around £12K for those combined, £12K for moving fees and clearing the £6K loan. All the extra expenses were taken into account for the budget. Higher council tax, gas & electricity bills upped etc.

We can do it, but it would be very tight.

We have been stuck paying 4.77% with NRAM for years, so this new mortgage is only £100 a month more expensive than our current one.

As for interest rate rises, I have no idea lol
Could you give me an example of any expected rate rises and what effect they would have?

enthusiasticsaver

It is difficult to say how much interest rates would rise but as you are going for a significantly higher mortgage then you would be advised to fix it so you know where you are for the next 3 to 5 years. The general expectation is that rates will rise gradually so at 0.25 or 0.5% at a time. How high it will go depends on BOE, the general economy and inflation rates.

If you are on a high rate now and the bigger mortgage only increases payments by £100 a month then that is good but there will still be probably higher council tax and utilities due to having a larger and more expensive property. Having seen many on the DFW forum get into financial difficulties due to overstretching themselves on buying a new property I would urge you to either renegotiate or resign yourself to doing the renovations slower. What rate have you been quoted for the new mortgage always assuming you can get a £230k one? As a general guide a 1% increase on your mortgage payment would amount to an extra £191 per month.

clairebeth

I would absolutely suggest you renovate as you go and as you can afford it. Get the best mortgage rate you can by keeping aside a bigger deposit and fix the rate so your outgoings are stable. If you HAVE to get rewired and heating done, that's understandable, but otherwise, use your surplus income to save up and do one thing at a time. Apart from anything else, it's so much easier to decide what you want when you've been living in a place for a little while, and you'll probably make changes that work better.

watcher27

enthusiasticsaver wrote: »

It is difficult to say how much interest rates would rise but as you are going for a significantly higher mortgage then you would be advised to fix it so you know where you are for the next 3 to 5 years. The general expectation is that rates will rise gradually so at 0.25 or 0.5% at a time. How high it will go depends on BOE, the general economy and inflation rates.

If you are on a high rate now and the bigger mortgage only increases payments by £100 a month then that is good but there will still be probably higher council tax and utilities due to having a larger and more expensive property. Having seen many on the DFW forum get into financial difficulties due to overstretching themselves on buying a new property I would urge you to either renegotiate or resign yourself to doing the renovations slower. What rate have you been quoted for the new mortgage always assuming you can get a £230k one? As a general guide a 1% increase on your mortgage payment would amount to an extra £191 per month.

As I said, all the additional council tax/gas & electricity cost etc were taken into account when we did our budget.

Maybe it would be better to take out the bare minimum we need on the mortgage, which would cover the house purchase (obviously lol), £12K selling fees and the £6K loan repayment. So a total mortgage of £207K.

Then maybe take a short term loan out to do the electricity & heating system? keeping the extra aside to settle it early?

Alarae

We have just had our mortgage offer issued with Santander, at approximately 4.8x income.

Slightly outside the norm as I have a second job along with my main salary, which is zero hour.

We had no debt, no bad credit history.

enthusiasticsaver

watcher27 wrote: »

As I said, all the additional council tax/gas & electricity cost etc were taken into account when we did our budget.

Maybe it would be better to take out the bare minimum we need on the mortgage, which would cover the house purchase (obviously lol), £12K selling fees and the £6K loan repayment. So a total mortgage of £207K.

Then maybe take a short term loan out to do the electricity & heating system? keeping the extra aside to settle it early?

That is good you have allowed extra for extra council tax etc.

Whenever we moved in the past (admittedly only three times) we always saved for fees and are debt averse so don't usually take out loans.

I think my earlier question bears some thinking about as what appears to be ok on paper sometimes is not so in reality. If you don't have savings now is there a particular reason for that and why do you think you will be more frugal after moving? I don't think in principle that there is anything wrong in borrowing on your mortgage to do things like rewiring, new heating system etc but does your lifestyle lend itself to being able to fund a renovation project on this scale without putting yourself heavily in debt and then of course you have to service that debt?

Have you approached a broker or any lenders? Until you have a buyer for your house you do not really know what mortgage you will need for certain so I would suggest that you research the costs of the works and look at your current income and outgoings to see how the new mortgage and cost of renovations will affect that. There is only a £35k differential between your house and the new one so I am guessing the new one is discounted because of the condition of it or are you buying in a cheaper area? How long are you willing to live in it as it is and is there any prospect of your income increasing significantly in the next few years. I would certainly think carefully about this before committing yourself to a much larger mortgage and possibly large bills for renovation.

watcher27

enthusiasticsaver wrote: »

That is good you have allowed extra for extra council tax etc.

Whenever we moved in the past (admittedly only three times) we always saved for fees and are debt averse so don't usually take out loans.

I think my earlier question bears some thinking about as what appears to be ok on paper sometimes is not so in reality. If you don't have savings now is there a particular reason for that and why do you think you will be more frugal after moving? I don't think in principle that there is anything wrong in borrowing on your mortgage to do things like rewiring, new heating system etc but does your lifestyle lend itself to being able to fund a renovation project on this scale without putting yourself heavily in debt and then of course you have to service that debt?

Have you approached a broker or any lenders? Until you have a buyer for your house you do not really know what mortgage you will need for certain so I would suggest that you research the costs of the works and look at your current income and outgoings to see how the new mortgage and cost of renovations will affect that. There is only a £35k differential between your house and the new one so I am guessing the new one is discounted because of the condition of it or are you buying in a cheaper area? How long are you willing to live in it as it is and is there any prospect of your income increasing significantly in the next few years. I would certainly think carefully about this before committing yourself to a much larger mortgage and possibly large bills for renovation.

Thanks for your advise!

Long/short story:
We have been living here since 2004 as a shared ownership, then decided to stair case all the way up and buy the remaining share in our property in 2007, right before (literally days) the housing crash. So the property value immediately plunged and its been in negative equity.
Its recovered now and is worth approx. £106K more than our settlement figure. Its only 2 bedroom terraced with no storage and we have massively outgrown it.

So a large 3 bed semi in the next village along has come up for sale that needs a lot of work, that's the only reason we could afford it (on paper). And my wife has always been into DIY and would love something to sink her teeth into, so its perfect. The surrounding properties that don't require any work are averaging around £40K - £50k more, completely out of our price range...

The house is liveable. But it has an old "back boiler" which is old and very inefficient, not to mention hideous! and the 60's wiring will need to be gone as I don't want non earthed/potentially dangerous wiring with kids in the house. The rest is general decorating which a few tins of paint and elbow grease can sort. As I said my wife loves all that stuff

We hope to make it a family home for years to come and increase its value.

As for saving, we do save up for things in particular like holidays etc and had been making monthly overpayments on the current mortgage, but we weren't planning on moving as everything was way out of our price range, but then we had the house valued purely to move our mortgage to a better rate, and it was valued waaaaayy more than we though, so then saw the new house etc etc lol

But your right, we need to think carefully about this!

Its difficult to keep excitement in check sometimes