Disposable Income Assessment - Mortgage Application

lizferris1984

I have just asked google a very simple question, and couldn't find an answer, so I've come here to ask the question instead.

I am currently a private tenant paying monthly rent. If I applied for a mortgage, would they exclude my current rent payments from an assesment of my monthly disposable income?

Common sense tells me they would. Because I wouldn't be renting a house anymore if my application was approved. Is that right?

glosoli

Yes they would.

The expenditure is based on the end position, not what it is currently.

newbietech

Very interesting question!

This is why mortgage advice is necessary as you will need to explain this to your broker and provide proof that your rent payments would be ending before the mortgage.

The short answer: they will not exclude it when working our your current mortgage affordability but they will include a note or make a separate affordability assessment without the rent payments to show that you can afford a mortgage. If you have ever filled in an application with any of the digital mortgage brokers( habito, trussle, huuti, mojo) You will see that they all ask if you expect any changes in your finances the future. This is where you will disclose that your rent will be ending soon.

Hope this helps.

ACG

Ignore this.

newbietech wrote: »

The short answer: they will not exclude it when working our your current mortgage affordability but they will include a note or make a separate affordability assessment without the rent payments to show that you can afford a mortgage. If you have ever filled in an application with any of the digital mortgage brokers( habito, trussle, huuti, mojo) You will see that they all ask if you expect any changes in your finances the future. This is where you will disclose that your rent will be ending soon.

Hope this helps.

They will ignore your rent UNLESS you tell them it will be continuing. If it is not continuing, it is not a problem.

kingstreet

Quite.

Your current mortgage payment is ignored for future mortgage affordability when moving; just as rent is ignored when moving from rented to your own purchase.

haras_nosirrah

kingstreet wrote: »

Quite.

Your current mortgage payment is ignored for future mortgage affordability when moving; just as rent is ignored when moving from rented to your own purchase.

Yes although with some lenders you have to put in the current mortgage and put that it will end otherwise they will include it as a commitment

kingstreet

haras_nosirrah wrote: »

Yes although with some lenders you have to put in the current mortgage and put that it will end otherwise they will include it as a commitment

Yeah, I was thinking about affordability calculator stage but you would certainly do that at DIP stage with most lenders.

zzzt

When most people get a mortgage, it is calculated such that the mortgage repayments will be close to what you are currently paying in rent.

If you ask to pay more or less on your mortgage, then they will consider what your disposable income is if you were paying that amount rather than whatever your rent is, because you won't be paying the rent any more. To do anything else would be stupid.

lizferris1984

ACG wrote: »

Ignore this.


They will ignore your rent UNLESS you tell them it will be continuing. If it is not continuing, it is not a problem.

Thank you - I see from your forum signature you are a mortgage adviser so I'm happy to take this as fact! It didn't make sense to me they'd do it any other way, just wanted to check. If it's true that I'd need to declare rent won't be continuing with some lenders, then clearly I would do so.

I'm in a position where due to a large deposit, my mortgage payments could be less than half the cost of the rent I currently pay per month. So would make a considerable difference to disposable income once I'm free of the rent.

Just wanted to check they would factor this in.

kingstreet

zzzt wrote: »

When most people get a mortgage, it is calculated such that the mortgage repayments will be close to what you are currently paying in rent.

If you ask to pay more or less on your mortgage, then they will consider what your disposable income is if you were paying that amount rather than whatever your rent is, because you won't be paying the rent any more. To do anything else would be stupid.

What?

WHAT?

Here's a question for you. How are the payments calculated for those who have been living with family?

The monthly payment is a function of three things. The amount borrowed, the applicable interest rate and the term.

Nothing more, nothing less.

lizferris1984

kingstreet wrote: »

What?

WHAT?

Here's a question for you. How are the payments calculated for those who have been living with family?

The monthly payment is a function of three things. The amount borrowed, the applicable interest rate and the term.

Nothing more, nothing less.

My mortgage payments will cost at least 40% less per month than my rent.

Hence my question, because if monthly payments were guesstimated as being close to my rent, I probably would not get a mortgage on my salary.

Thank God for mathematics!