Help with mortgage confusion.

rh205

Hi,

I am a first time buyer who has a gross income of £17460. I have been in post for over three years with the NHS. Expenses at the moment are fuel at £150 pcm and a mobile phone bill of £12 pcm. My deposit would be £30k. My credit score according to Experian is 999 (Excellent). I have not got any debts and pay my bills and credit card in full and on time.

I am currently looking at 2 bed terraces in my local area with a price range of between £150,000 for old builds and £190,000 for new builds.

However the issue I'm having is when I use various online affordability calculators the maximum amounts are ranging from between £50k and £86k therefore far lower than the £160k I require.
I'm wondering why these figures are so low and whether I would be best off going to a mortgage adviser or speaking with a personal financial adviser at my banks local branch.

Am I being stupid and missing something or am I ineligible for a mortgage with my current financial situation?

getmore4less

£17,460 * 5 = £87,250

that explains it

your expenses look a bit light
where is your rent, food, car tax, insurance, maintenance, clothes......


9 times gross salary is not going to happen.

AnotherJoe

rh205 wrote: »

Hi,

I am a first time buyer who has a gross income of £17460. I have been in post for over three years with the NHS. Expenses at the moment are fuel at £150 pcm and a mobile phone bill of £12 pcm. My deposit would be £30k. My credit score according to Experian is 999 (Excellent). I have not got any debts and pay my bills and credit card in full and on time.

I am currently looking at 2 bed terraces in my local area with a price range of between £150,000 for old builds and £190,000 for new builds.

However the issue I'm having is when I use various online affordability calculators the maximum amounts are ranging from between £50k and £86k therefore far lower than the £160k I require.
I'm wondering why these figures are so low and whether I would be best off going to a mortgage adviser or speaking with a personal financial adviser at my banks local branch.

Am I being stupid and missing something or am I ineligible for a mortgage with my current financial situation?

As GM4L said, yes you are missing all your other expenses such as food, clothes, heating/lighting/water, council tax, insurance, holidays, car (tax, maintenance, depreciation etc), pension, entertainment (cinema, meals out etc) and no doubt many areas I've forgotten.


Rough rule of thumb is you can borrow about 4.5x your salary. Essentially you need to up your salary considerably, find someone else to buy with, buy something considerably cheaper, look at shared ownership or a combination of all of those.

rh205

I found my P60 from the last financial year (17-18) and it quotes a total pay before tax of £19892. Looking at the pay rate on my March 2018 payslip my gross pay for the same year was £16104 + 3788 in bonuses. The £17460 quoted earlier is my new pay rate as a result of my annual increment plus the NHS pay rise. I won't know this years bonuses until I get my P60 next year.

At present the only expenses I have are:

Annual car running costs including: Service, MOT, Insurance. £0 tax as it's a Band A vehicle.

Mobile Phone bill of £12 pcm.

Fuel costs of ~£150 pcm.

I pay £250 rent to my parents but this will stop at the time of mortgage.

As I am unsure of the expenses should I go away and research these and see what affect it has on the final figure?

As a comparison I ran my sisters house through the check which she bought 7 years ago for £121K and £30k deposit and it came out with £72k. So £19k lower than the £91k required.

csgohan4

even a 20k salary is not enough to get a 150k house, you can generally only borrow 4.5x your gross salary


you need to loweryour budget I am afraid

Thrugelmir

Live at at a while longer and keep saving. Hopefully your annual income will increase in time as well.

AnotherJoe

rh205 wrote: »

I found my P60 from the last financial year (17-18) and it quotes a total pay before tax of £19892. Looking at the pay rate on my March 2018 payslip my gross pay for the same year was £16104 + 3788 in bonuses. The £17460 quoted earlier is my new pay rate as a result of my annual increment plus the NHS pay rise. I won't know this years bonuses until I get my P60 next year.


Unfortunately your salary is nowhere near enough to get the mortgage you want. What they will generally do is perhaps salary plus 50% bonuses. That still puts you on about £90k which when you add your deposit puts a cap on of about £120k. So you are at least £30k short.


At present the only expenses I have are:

Annual car running costs including: Service, MOT, Insurance. £0 tax as it's a Band A vehicle.

Mobile Phone bill of £12 pcm.

Fuel costs of ~£150 pcm.

I pay £250 rent to my parents but this will stop at the time of mortgage.



Indeed it will. It will be replaced by "food, clothes, heating/lighting/water, council tax, insurance, holidays, car (tax, maintenance, depreciation etc), pension, entertainment (cinema, meals out etc) and no doubt many areas I've forgotten"

As I am unsure of the expenses should I go away and research these and see what affect it has on the final figure?
No, because you are starting from the wrong place. You are assuming that what you can afford is based on your earnings minus costs & expenses leaving amount for mortgage, and whilst they will look into your expenses, an overriding factor is the "multiple". 4.5 x as a rough guide as said. So, you are nowhere near where you need to be.


As a comparison I ran my sisters house through the check which she bought 7 years ago for £121K and £30k deposit and it came out with £72k. So £19k lower than the £91k required.

What check is that?

rh205

Thrugelmir wrote: »

Live at at a while longer and keep saving. Hopefully your annual income will increase in time as well.

My annual income is set to rise over the next few years due to the recent NHS pay deal. But only to £19,337.

Two bed properties in my area range from £145k to £250k.

AnotherJoe wrote: »

What check is that?

The checks I did on my sisters property were both through Nationwide and Rightmove. It was done out of interest and the figures displayed taken with a pinch of salt.

She bought her two bed terrace back in 2010 for total of £121k with £30k deposit so she needed a mortgage of £91k. Her basic pay was £16,753. I took these figures and ran the checks and it came back with values between £53k and £75K.

julicorn

That your sister managed to get a mortgage slightly higher than what calculators are telling you right now 7 years ago doesn't help your case whatsoever.

I'm sorry to say, but you just have unrealistic expectations. In order to borrow £160k, you'd need to earn over £35k.
My husband and I got a mortgage for £200k, and that was the absolute top of our affordability, even though there's two of us working full time (and both making quite a bit more than what you are on atm).

They calculate your affordability based on potentially higher interest rates as well. So with the rates as they are at the moment, you'd be looking at just under £700 a month for your 160k mortgage (assuming 25 years), which is quite a lot already on your income - but banks also take into account whether you can afford it if rates go up to 7 or 8%. That would increase your payments to over £1,200, which is almost all of your take-home pay each month. Of course they're not going to give you a mortgage for that amount.

amnblog

Regardless of what you believe you can afford based on your net income and outgoings the Lender has two limitations.

Affordability, calculated based on your income, outgoings, and how much Headroom the Lender expects and....

Maximum multiples, which vary by Lender, income, and deposit size.

These limits are reported to the regulator and will be adhered to.

Your affordability limit with any Lender will top out in five figures.

You could consider buying with a Friend or perhaps Shared Ownership.

bethwilliams95

Look at a cheap new build using help to buy... they loan you up to 20% towards deposit so the mortgage will require a lower amount and then u can use some of your 30k towards furniture and legal fees etc x