how to know how much I can borrow

JeffMason

I'm new to the house buying and getting a mortgage game so please excuse the potentially stupid questions...

I've had a look at various calculators to see how much I could theoretically borrow... but I'm hesitant to start seriously looking into properties until I know exactly how much of a mortgage I can get. So my question is can I get a solid answer on this before I have a house I want to buy?

Will lenders tell me exactly what they'll lend me and at what rate etc. so I can then go and look for properties that fit into that bracket?

And if I have done that in advance, how quickly can the process of buying the house happen? I'm guessing that's a "how long is a piece of string" question but is there a best case, average, and worst case scenario?

Thank you in advance!

ACG

You will not know the rate in advance as rates today can be different tomorrow.

In terms of how much you can borrow, the affordability calculators will all be accurate, providing you enter the information correctly. They will all differ most will fall in at a similar figure but there may be some that are miles out (more or less).

You can get an idea of the rates available by looking at the lenders deals. Again, many of the high street banks will fall in at around the same sort of rates.

The way we usually work is to speak to the customers, complete a factind, advise of lending amount and approximate rates and then wait for the customer to find a property.

We can then obtain a Decision in Principle (DIP) with whoever the best lender is on the day and get the application in.

Some brokers work differently and lenders will work differently again.

JeffMason

My situation isn't as straightforward as the calculators want it to be though.

I have quite a big deposit and don't know if that makes a difference?

I also have some money coming in as interest from savings, can that count towards income?

On top of that I work my proper job part-time and will be (guaranteed) increasing my hours towards the end of next year. Can that be taken into account when the amount they'll lend is offered?

And lastly, I make some extra money working freelance, but that is sporadic and so I assume won't be counted.

I'd like to get as accurate a figure as possible as I'm not sure how to start looking without it. It's the difference between houses and flats and also between a nice area and a very nice area!

JeffMason

Can anyone recommend a few calculators that will give me as accurate a figure as possible? And perhaps I can create an average from the different results.

sammyjammy

Your question was answered very thoroughly, just because you have a big deposit it doesn't make them less accurate. Its about them seeing what you can afford to pay back as well.

Your part-time work would be used with the hours you work now. You are correct its very unlikely they are likely to take your erratic freelance income into account, see it is a bonus.

My advice would be think about a mortgage amount you would feel comfortable with covering rather than looking for the most amount of money you can borrow.

If you are looking to buy soon why not find a good broker to assist you through the process.

ACG

JeffMason wrote: »

My situation isn't as straightforward as the calculators want it to be though.

You probably need to pick up the phone to the lenders then to find out the specifics or employ a broker to do it for you.

JeffMason wrote: »

I have quite a big deposit and don't know if that makes a difference?

Not usually, your income will support a loan of a certain amount. Whether you have £1 deposit or £1m, your income will only support what it will support. Although some lenders will allow you to lend more if you are deemed a lower risk (maybe a 25% deposit) but this would usually be accounted for on affordability calculators anyway.

JeffMason wrote: »

I also have some money coming in as interest from savings, can that count towards income?

Maybe/maybe not, this will be lender specific. I also assume the interest earned will be on money you are using towards your deposit? If that is the case, then on completion the interest earned will come down?

JeffMason wrote: »

On top of that I work my proper job part-time and will be (guaranteed) increasing my hours towards the end of next year. Can that be taken into account when the amount they'll lend is offered?

Probably not, some lenders will accept pay rises 3-6 months ahead of time, but 12 months is probably too far away. But there may be lenders who will.

JeffMason wrote: »

And lastly, I make some extra money working freelance, but that is sporadic and so I assume won't be counted.

If you have 2 years history declaring this income on a self assessment, then yes you can probably use 100% of the average.

JeffMason wrote: »

I'd like to get as accurate a figure as possible as I'm not sure how to start looking without it. It's the difference between houses and flats and also between a nice area and a very nice area!

For anything like this, I call up the lenders we are looking at and run through the income sources and find out how the lender would expect me to put it on their affordability calculator. Every lender will have their own ways, some will use 100% of some and none of others, some will use 50% of some and 100% of others - but the ones who will use say 100% of everything may not necessarily lend the most.

Dont take this as a jibe, its not - but basically there is no easy way around this. You are going to have to pick up the phone and have some conversations, or employ a broker to do it on your behalf.


On this forum, I often see posts where people say they will use a broker to save 0.1% on a Mortgage. It always annoys me because our job is not to save 15p a month. Most of our job is taken up with research (criteria) which can take hours or even days for the more complex cases.

litepay

To check how much you can get: you could use the calculators that the brokers use, they are very detailed.

https://resources.barclays.co.uk/mortgage-calculators/residential-affordability
https://www.nationwide-intermediary.co.uk/calculators/aff_calc
https://www.santanderforintermediaries.co.uk/calculators-and-forms/affordability/

You could also get an agreement in principle from Barclays (there might be others) without impacting your credit history/score:

https://www.barclays.co.uk/mortgages/agreement-in-principle/

I'd use a broker to get the actual mortgage if I were you.

ACG

The calculaotrs are only correct if you are putting in the correct information, which I think is reason for the post. The OP is unsure what information to enter. The same goes for an AIP.

litepay

Well, those intermediaries websites also include very detailed documentation about lending criteria, how to fill out the form and what counts as income...

https://intermediaries.uk.barclays/home/lending-criteria/
https://intermediaries.uk.barclays/home/useful-documents/

JeffMason

sammyjammy wrote: »

Your question was answered very thoroughly, just because you have a big deposit it doesn't make them less accurate. Its about them seeing what you can afford to pay back as well.

Your part-time work would be used with the hours you work now. You are correct its very unlikely they are likely to take your erratic freelance income into account, see it is a bonus.

My advice would be think about a mortgage amount you would feel comfortable with covering rather than looking for the most amount of money you can borrow.

If you are looking to buy soon why not find a good broker to assist you through the process.

I'm currently paying £700 per month in rent but it seems that the most I'll get lent for a mortgage will have me paying back much less than that per month. So I'm wiling to pay more than they seem to want to lend me...

JeffMason

ACG wrote: »

You probably need to pick up the phone to the lenders then to find out the specifics or employ a broker to do it for you.


Not usually, your income will support a loan of a certain amount. Whether you have £1 deposit or £1m, your income will only support what it will support. Although some lenders will allow you to lend more if you are deemed a lower risk (maybe a 25% deposit) but this would usually be accounted for on affordability calculators anyway.


Maybe/maybe not, this will be lender specific. I also assume the interest earned will be on money you are using towards your deposit? If that is the case, then on completion the interest earned will come down?


Probably not, some lenders will accept pay rises 3-6 months ahead of time, but 12 months is probably too far away. But there may be lenders who will.


If you have 2 years history declaring this income on a self assessment, then yes you can probably use 100% of the average.


For anything like this, I call up the lenders we are looking at and run through the income sources and find out how the lender would expect me to put it on their affordability calculator. Every lender will have their own ways, some will use 100% of some and none of others, some will use 50% of some and 100% of others - but the ones who will use say 100% of everything may not necessarily lend the most.

Dont take this as a jibe, its not - but basically there is no easy way around this. You are going to have to pick up the phone and have some conversations, or employ a broker to do it on your behalf.


On this forum, I often see posts where people say they will use a broker to save 0.1% on a Mortgage. It always annoys me because our job is not to save 15p a month. Most of our job is taken up with research (criteria) which can take hours or even days for the more complex cases.

I want to go with more than a 25% deposit, more like 50%.

And yes, the interest I currently earn will reduce with the deposit but I would only add in the interest I would get from the amount remaining after I've taken out the deposit.

That's a shame. My proper job pay will go up in 12 months time. Perhaps I'll have to wait until closer to then before buying? I'd rather not, but... I'll have a look at calculators and see what difference my pay now and pay in year makes...

I'm not against talking to lenders. I just wanted to know if I could have those conversations before I have a property I want to buy. I want to know how much I can borrow before I look at houses and not get set on one and then realise I can't afford it, OR stick with cheaper properties only to then find out I could have been looking in a nicer area or at a slightly bigger space.

I appreciate the hard work a broker puts in. I'm not looking for specifics of rates etc at this point, but just a sense of the most I could borrow. I might not want to take it all, but it's good to have an absolute maximum in mind when looking at property.