Mortgage affordability and expenses

Legacy_user

Hello!

My partner and I are looking to get our first house but I don’t really know how the affordability side of getting a mortgage works. What expenses do they look at? Currently it looks like we have 0 disposable income but that’s because we pile it all into saving schemes/ISAs etc. If we want a mortgage of approx. 180k with combined income of 42,000, what would our disposable income need to look like?

Thanks!:D

[Deleted User]

Mortgages below £50k ish income you'd generally be limited to 4.5x salary - which gives you £189k max.

If you're wanting a mortgage within £10k of the limit, then it'll be more risky than say if you only wanted £130k

Expenses - lenders will generally use ONS or their own model to calculate things like Gas/Electric/Food/Entertainment etc. That is then factored into your max borrowing based on remaining net income and how much you could afford a 'stressed' mortgage (if interest rates rose to 6% etc)

If you go to a smaller building society (Cambridge are one as I looked at them), they'll accept 'verified' figures instead of ONS for some categories. Say you live in a City Centre, down the road from work and don't own a car - using the national average for Travel expenditure is harsh if you can prove otherwise (via bank statements).

Any costs which fall outside of ONS (in particular, Childcare) will be deducted from your max borrowing. As will excessive debt/credit card balances etc.

I'd speak to a broker who will go through your expenses with you both.

Also - not saying you won't - but make sure you correctly let the broker know of all expenses etc. It's worrying the amount of people that "forget" they've got a Hire Purchase or £200 a month childcare etc and then find out, a few weeks down the line, they can't borrow what they want.

ACG

Generally speaking they will use generic (ONS) figures for affordability purposes with the exception of maybe travel and loans/credit cards.

Putting money in to a savings account is not an expense as you are just moving your money around and can stop at any point. It is not a payment to someone.