How much are we likely to be able to borrow?

luke222010

Hi,

I've used a number of online banking 'how much can I borrow' calculators, which only take into consideration gross income, they do not take into consideration a number of outgoings, especially childcare.
I was hoping anyone in the know on this forum, whether through their employment or experience can hazard a guess as to how much we can hope to borrow when we look to move house at some point this year.

We have equity of around £120k, and are looking to sell our house in the next few months with a view to getting something bigger.

When we bought this house 5 years ago, we had no children and therefore outgoings were minimal (no debts, standard outgoings, i.e. council tax, utilities, mobile phones etc).

Since then, we have had two young children, and my wife will be due to go back to work in March part-time.
Our gross income is roughly £70k between us.

Can anyone take an educated guess at what we would be able to borrow in order to get something bigger?

We have been hoping to look at getting a house around the £400k mark (for what we want that is roughly the average cost), therefore have over 25% deposit, and would probably look to repay the mortgage over the course of the next 35 years. I am 32, my wife 31. Are we being too optimistic thinking we can get a loan of around £280k?

Thanks in advance for replies.

Thrugelmir

luke222010 wrote: »

I've used a number of online banking 'how much can I borrow' calculators, which only take into consideration gross income.

That's the fundamental basis on which mortgage lending is calculated. What other income are you hoping will be taken into account?

Online calculators are a reasonable guide, though can vary lender to lender. Are you falling short of your £300k objective?

ACG

Some lenders will lend the same regardless of deposit. Some will vary depending on the LTV and so they generally either ask what the LTV is or what the purchase price/value and loan amount is that you are after.

The affordability calculators are generally pretty accurate.

As a stab in the dark, I would say £325,000 (give or take maybe £10-15k)plus your deposit.

luke222010

Thrugelmir wrote: »

That's the fundamental basis on which mortgage lending is calculated. What other income are you hoping will be taken into account?

Online calculators are a reasonable guide, though can vary lender to lender. Are you falling short of your £300k objective?

My apologies - I didn't explain properly - I have updated the original post.
Basically, I would like an estimate based on outgoings against that gross income, especially the £800 a month childcare fees.

The calculators, prior to those outgoings going against income, are estimated anywhere between £275k upwards of £340k so for the most part in the realm of what we want to lend, but I am obviously concerned about how the childcare costs could skew the amount banks are willing to lend.

Retired_Mortgage_Adviser

280k of borrowing based on 70k of gross income should be achievable (barring any complications in the background).

2 aspects that may significantly affect affordability -

- do you expect any childcare costs once your wife goes back to work? If so, how much?
- any debt in the background that will remain upon completion?

luke222010

Retired_Mortgage_Adviser wrote: »

280k of borrowing based on 70k of gross income should be achievable (barring any complications in the background).

2 aspects that may significantly affect affordability -

- do you expect any childcare costs once your wife goes back to work? If so, how much?
- any debt in the background that will remain upon completion?

Other than a sofa we recently purchased for £900 being paid over 4 years, we have no debts.
Childcare costs will be around £800 starting from March.

The childcare costs are the key difference between when we took the mortgage out back in 2014, compared to the mortgage we hope to take out this year.

Retired_Mortgage_Adviser

In that case, with 70k income, childcare outgoings of 800pm and the debt mentioned, I don't see any evident affordability issues with getting a 280k mortgage on a 400k (or thereabouts) property.

Have a play around with a couple of mainstream lender calculators to see how the childcare costs/debt impact borrowing
https://www.nationwide-intermediary.co.uk/calculators/affordability-calculator
https://www.santanderforintermediaries.co.uk/calculators-and-forms/affordability/

luke222010 wrote: »

Other than a sofa we recently purchased for £900 being paid over 4 years, we have no debts.
Childcare costs will be around £800 starting from March.

The childcare costs are the key difference between when we took the mortgage out back in 2014, compared to the mortgage we hope to take out this year.

ACG

The £800 a month is going to make a difference to those figures I gave, maybe £40k difference.

I am not sure I understand your question though, surely when you put all of this in the calculators you are getting the figures back. I think they all either ask about LTV or the value and loan amount.

The figures you get back will vary and can vary significantly, the biggest difference I have seen is about £200k difference, but £30-40k is not uncommon.

The LTV can affect things but not usually massively, ultimately your income will support a loan of a certain amount regardless of whether you have £1 deposit or £1m.

luke222010

ACG wrote: »

The £800 a month is going to make a difference to those figures I gave, maybe £40k difference.

I am not sure I understand your question though, surely when you put all of this in the calculators you are getting the figures back. I think they all either ask about LTV or the value and loan amount.

The figures you get back will vary and can vary significantly, the biggest difference I have seen is about £200k difference, but £30-40k is not uncommon.

The LTV can affect things but not usually massively, ultimately your income will support a loan of a certain amount regardless of whether you have £1 deposit or £1m.

Other than the Halifax calculator - which suggested we can look to borrow around £220k, therefore much less than we were hoping for - the calculators I've used do not take into consideration any outgoings, without going through a complete soft check. Obviously I will look to do this, but was purposely waiting for my annual pay review which will be in the next month.

Retired_Mortgage_Adviser

The broker affordability calculators that I've shared links to above take into account outgoings, etc. The consumer facing ones on the lender websites are sometimes overly simplistic.

luke222010 wrote: »

Other than the Halifax calculator - which suggested we can look to borrow around £220k, therefore much less than we were hoping for - the calculators I've used do not take into consideration any outgoings, without going through a complete soft check. Obviously I will look to do this, but was purposely waiting for my annual pay review which will be in the next month.

ACG

luke222010 wrote: »

Other than the Halifax calculator - which suggested we can look to borrow around £220k, therefore much less than we were hoping for - the calculators I've used do not take into consideration any outgoings, without going through a complete soft check. Obviously I will look to do this, but was purposely waiting for my annual pay review which will be in the next month.

Interesting. I only use the brokers affordability calculators and they all ask about commitments. I did not realise the direct to customer ones were so different. I suppose it makes sense though as some lenders ignore commitments with less than 6 months left to run for example so I suppose they want to ensure you are getting the right figures.