How much can I borrow for a mortgage?

s34rle

Hi All,

I’m thinking of purchasing a property but I’m worried me and my partner don’t earn enough as a couple to qualify for the amount we need to borrow. London is not cheap.

Do all lenders just work off the same calculator or are there lenders that use a common sense approach?

In an ideal world we would like to be looking at properties in the £325-£350k region but we only earn £50k as a couple.

We would however have about £100k in a form of a deposit (50k equity, £50k savings) Would this help us to borrow more?

Are there any lenders that work of repayment calculations?
Purchase price £325,000
Deposit amount £82,000 (25%)
Mortgage amount £243,000

3 year fixed rate 1.73%
£998.32 (25 years)
£771.71 (35 years)

Appreciate your time in replying.

Thank you

iquit

Have you approached a mortgage broker? They need to be whole of market, to be best placed to advise you. Good luck.

cattie

It isn't just your salaries that lenders take into account, but also want to know all of your outgoings to enable them to work out affordability. You can run your financial details through the calculator here to get an idea of what amount you could possibly borrow.

https://www.moneyadviceservice.org.uk/en/tools/house-buying/mortgage-affordability-calculator

s34rle

I have used the calculators but they all use the same formula.

I just can’t get my head around that you can only borrow x4 your joint salary and it doesn’t matter if you have a 5% deposit or a 25% deposit. Obviously having the higher deposit will mean your repayments are less, therefore you should be allowed to borrow a little bit more.

The below is all based on 35 year mortgage. 3 year fixed rate.

Customer A) £771 repayments with a 25% deposit
Customer £977 repayments with a 10% deposit
Customer C) £1184 repayments with 5 deposit

So how is it right that all 3 of those customers can borrow the same amount of money as they all earn the same. But because of the deposits the repayments have a £200-£400 swing.

BoGoF

Because their LTV is less = less risk

And it's 'right' because that is their perogative.

mcpitman

s34rle wrote: »

I have used the calculators but they all use the same formula.

I just can’t get my head around that you can only borrow x4 your joint salary and it doesn’t matter if you have a 5% deposit or a 25% deposit. Obviously having the higher deposit will mean your repayments are less, therefore you should be allowed to borrow a little bit more.

The below is all based on 35 year mortgage. 3 year fixed rate.

Customer A) £771 repayments with a 25% deposit
Customer £977 repayments with a 10% deposit
Customer C) £1184 repayments with 5 deposit

So how is it right that all 3 of those customers can borrow the same amount of money as they all earn the same. But because of the deposits the repayments have a £200-£400 swing.

Because they don't use salary multipliers, they calculate affordability, which changes dependant on current and future commitments.


In addition in your example, Client A may have a 25% deposit and a repayment of £771, but they may also have £1k of additional commitments, making total outgoing £1,771 p/m


Client C may "only" have a 5% deposit and repayment of £1,184, and £100 in other commitments, making total repayment. making total outgoing £1,284.


Both clients earn the same none but have different commitments and outgoings, making the "affordability" a different factor.


Arguably in my example of your example (!?!), Client C is more affordable, and Client A is less risky due to LTV %age.

Exodi

s34rle wrote: »

The below is all based on 35 year mortgage. 3 year fixed rate.

Customer A) £771 repayments with a 25% deposit
Customer £977 repayments with a 10% deposit
Customer C) £1184 repayments with 5 deposit

So how is it right that all 3 of those customers can borrow the same amount of money as they all earn the same. But because of the deposits the repayments have a £200-£400 swing.

Your figures are heavily deceptive as they seem to be based off the same purchase price ergo each customer isn't borrowing the same amount???

I'll do a proper comparison.

All customers are sole applicants with no dependants earning £50,000 p/a 35 year mortgage 2 year fix - I used Lloyds for this illustration whom will lend £237,500 of which each customer borrows the full amount.

Customer A) £879.26 monthly repayment - 25% deposit - house value £316,666.67 (2.75%)
Customer £911.81 monthly repayment - 10% deposit - house value £263,888.89 (3.00%)
Customer C) £1,006.28 monthly repayment - 5% deposit - house value £250,000.00 (3.70%)

Doesn't look as outrageous. Each person borrows the same amount but pays varying amounts depending on the risk they pose to the bank. I do somewhat agree that if the bank deems someone on £50,000 able to make repayments of £1,006.28 a month, then there's no real reason that Customer A couldn't borrow more money overall but we don't make the rules!

EDIT:

mcpitman wrote: »

Because they don't use salary multipliers, they calculate affordability, which changes dependant on current and future commitments.


In addition in your example, Client A may have a 25% deposit and a repayment of £771, but they may also have £1k of additional commitments, making total outgoing £1,771 p/m


Client C may "only" have a 5% deposit and repayment of £1,184, and £100 in other commitments, making total repayment. making total outgoing £1,284.


Both clients earn the same none but have different commitments and outgoings, making the "affordability" a different factor.


Arguably in my example of your example (!?!), Client C is more affordable, and Client A is less risky due to LTV %age.

The OP has said he's using mortgage calculators, which definitely do use salary multipliers....

The figures he's provided are different scenarios using a mortgage calculator (as I have done), so your whimsical stories regarding the possible personal financial circumstances of these made up customers is entirely irrelevant.