Are affordability calcs accurate?

Herbalus

I have plugged joint income into a calculator to see how much I could borrow, and the result is always 4.75x salary.

Even if I were to earn £100k a year, at which point higher rate tax becomes payable on more than half, the proposed max borrowing is still 4.75x so £475k.

Are these multiples realistic in general?

I suppose that for 2 people earning £30k each (max mortgage £275k), repayments would be £640 each per month on a 25 year mortgage at 2.5%. Not unaffordable per se, but does seem quite a lot, getting on for 40% of salary.

ACG

They are generally as accurate as the information entered.
So as an example, some lenders will use the bonuses on your last 3 pay slips and average that out for an annual figure, other lenders will use an average of the last 2 P60s.

You just need to ensure you are entering the information as the lender would expect.

middleclassbutpoor

You could be using a basic calc which will work on those assumptions.

If you use a detailed calc, you should find that the figures more differently.

I found that the nationwide and yorkshire bs gave 2 different values using their more comprehensive calcs. May be worth looking at those to see if you can see a difference.

https://www.nationwide.co.uk/products/mortgages/our-mortgages/mortgage-calculators/mortgage-affordability-calculator

https://online.ybs.co.uk/public/mortgages/quick_enquiry.do

Herbalus

That’s hilarious! I just tried nationwide with its 7 pages of questions and it’s come out even higher.

Seems I’m being prudent and not wanting to think borrowing the likes of £300k would be sensible, but maybe other people do!

Thrugelmir

Herbalus wrote: »

I suppose that for 2 people earning £30k each (max mortgage £275k), repayments would be £640 each per month on a 25 year mortgage at 2.5%. Not unaffordable per se, but does seem quite a lot, getting on for 40% of salary.

Extend the term to 30/35 years. Lowers the repayments.

kingstreet

You need to understand the nuances.

In Nationwide's calculator for instance, you enter only essential travel, such as to and from work, not your total travel costs as ONS figures are used for general travel.