Affordability Over Multiples ?

jedmc571

Hi
I posted something smilar months ago, but now I need to take action towards buying a house
The problem I currently have is that my salary of £26k will only get me £100k
I'm looking at a £195k house, I have a £40k deposit no debts and can afford upto £900 per month
Are their any lenders who could look at this ?

Regards

Jed

meanmachine_2

jedmc571 wrote:

Hi
I posted something smilar months ago, but now I need to take action towards buying a house
The problem I currently have is that my salary of £26k will only get me £100k
I'm looking at a £195k house, I have a £40k deposit no debts and can afford upto £900 per month
Are their any lenders who could look at this ?

Regards

Jed

So in fact you're looking at a £155K mortgage which would be....SIX times your salary.

How will you be able to afford this burden when/if IR rates rise? Or will you simply stop eating? Could be good for your figure, but bad for your mental health.

Having said that I've got mad friends who have lied-to-buy and taken out self cert mortgages that are seven times their earnings. But have they cut down on their expenditure as a result? Have they put money in the bank to insure them against future periods of high inflation? Uh uh.

It's up to you. IR rates don't look as if they're going to soar in the coming months. But they don't look like they're budging downwards much either.

Why can't you just buy a property @ £150K then trade up when your wages rise?

I'm guessing your take home will be around £1500. So you're prepared to throw £900 of this away on a mortgage? Just imagine, by somecrazy fate of the economy that int rates do go back up to their historical average - i know, how unlikely is that?!!!! - you'll have about 3p to live on.

Repo time!

ManAtHome

Ultimately it's down to you, but do some planning first. You have a reasonable sum to use as a deposit, but you may need to hang to some of that as it's generally a good idea to be able to pay the bills if your income dips or disappears. Do a sensible budget - all the usual household bills, insurance, holidays, cars, going out etc then bear in mind that you may have to live on this for several/many years.

Very different in the 'good/bad old days' of high inflation. As most annual wage increases are around or just above inflation, 3 or 4 years could very quickly reduce tha relative value of your debt - not as quick these days. To calculate how quickly your salary would double given inflation-only pay rises divide the inflation rate into 72, eg
at 4% - 18 years... at 10% - 7 years.
Bottom line is that debt is less of a gamble when inflation is high.

meanmachine_2

That's a good point manathome.

People who bought in the 80s are always banging on about how teeny tiny their mortgages have become. Correct.

That's because periods of high inflation (ie pain) quickly whittled them away.

Now the government is seeking a low inflation economy and will do everything in its power to maintain it. That means the debt lingers for years and years and years.

It also means house prices go up and so the debt goes up.

Right now is the worst time to buy, if you ask me - high levels of debt (ie mortgage) and a very low level of inflation.

Again, as I say, now could not be the worst time to buy, whether you're an "investor" *spit* or FTBer.

But then, it's up to you. I don't know your personal circumstances. But I can assure you, you won't be able to save so much with such a large mortgage. And you could well see that £40K of euity drain away over the next year or so.

herbiesjp

In answer to OPs original question, there may be a few, that will look at the scenario for you - but they will go over the scenario in minute detail.

Only after they have recieved a full application will they decide on whether to agree the loan or not - i do think it may be a stretch too far.

abc

Mortgage Express used to have a what they called a Non Status mortgage that didn't require income details as long as there was a large deposit (I think it was 25%).

I looked on their website but I can't see it so I assume it doesn't exist anymore. I'm not sure if anyone else did or is still doing a similar product.