How much could I borrow?

gabby71

Hi

l’m looking to buy my first property next summer after a ccj drops off my file, will be buying alone and will have around £21000 saved by then.
My salary is £24k and I get £4250 PIP annually.
I have 5k on car finance - paying £59 per month and balloon payment of £3k odd due in October 2023.
By the summer I’ll have about £1k credit card balance.
What could I expect to be able to borrow?
Also would lending figures differ if I looked into a shared ownership property?

thanks

Gab

MattMattMattUK

At the moment, how long is a piece of string.
The mortgage lending criteria are a little in flux, by next summer the economic situation will likely be very different. Lenders will sometimes allow up to a maximum of five times salary, but for many it is less and debts can be deducted as either a lump figure or based on affordability. Some will accept PIP as part of income, others will not.

In the interim you would be better off using a small amount of your deposit to clear your credit card debt if that is only a few thousand. What is the interest rate on both your card and car finance? 

gabby71

MattMattMattUK said:

At the moment, how long is a piece of string.
The mortgage lending criteria are a little in flux, by next summer the economic situation will likely be very different. Lenders will sometimes allow up to a maximum of five times salary, but for many it is less and debts can be deducted as either a lump figure or based on affordability. Some will accept PIP as part of income, others will not.

In the interim you would be better off using a small amount of your deposit to clear your credit card debt if that is only a few thousand. What is the interest rate on both your card and car finance? 

My cc is a 0% balance transfer, currently at £1700 but paying off £100 per month (0% till December 2021)
The APR on the car finance is 9.2% I believe.

K_S

gabby71 said:

Hi
l’m looking to buy my first property next summer after a ccj drops off my file, will be buying alone and will have around £21000 saved by then.
My salary is £24k and I get £4250 PIP annually.
I have 5k on car finance - paying £59 per month and balloon payment of £3k odd due in October 2023.
By the summer I’ll have about £1k credit card balance.
What could I expect to be able to borrow?
Also would lending figures differ if I looked into a shared ownership property?
thanks
Gab

@gabby71 Ignoring any other factors, based on the limited info in your post you should be able to borrow in the region of 4-4.5 times total income (salary + PIP).

Plenty of mainstream lenders will take PIP at 100%, just need the current award letter. The current credit commitments you have are fairly minor so whether you clear them or not is unlikely to affect your max borrowing in a material way.

Just for your information, the car loan will be judged on the monthly outgoing and the credit card commitment is calculated as a monthly outgoing of x% (diiffers from lender to lender) of the outstanding balance, even if it's at 0% currently. So to maximise potential borrowing on your mortgage, try to keep these to a minimum.

gabby71

K_S said:

gabby71 said:

Hi
l’m looking to buy my first property next summer after a ccj drops off my file, will be buying alone and will have around £21000 saved by then.
My salary is £24k and I get £4250 PIP annually.
I have 5k on car finance - paying £59 per month and balloon payment of £3k odd due in October 2023.
By the summer I’ll have about £1k credit card balance.
What could I expect to be able to borrow?
Also would lending figures differ if I looked into a shared ownership property?
thanks
Gab

@gabby71 Ignoring any other factors, based on the limited info in your post you should be able to borrow in the region of 4-4.5 times total income (salary + PIP).

Plenty of mainstream lenders will take PIP at 100%, just need the current award letter. The current credit commitments you have are fairly minor so whether you clear them or not is unlikely to affect your max borrowing in a material way.

Just for your information, the car loan will be judged on the monthly outgoing and the credit card commitment is calculated as a monthly outgoing of x% (diiffers from lender to lender) of the outstanding balance, even if it's at 0% currently. So to maximise potential borrowing on your mortgage, try to keep these to a minimum.

Thanks for the info 😊 interesting advice regarding the car loan - I did wonder whether it would be the full amount including the balloon payment, or the monthly payment that would be factored in for affordability 👍🏼

[Deleted User]

K_S said:

gabby71 said:

Hi
l’m looking to buy my first property next summer after a ccj drops off my file, will be buying alone and will have around £21000 saved by then.
My salary is £24k and I get £4250 PIP annually.
I have 5k on car finance - paying £59 per month and balloon payment of £3k odd due in October 2023.
By the summer I’ll have about £1k credit card balance.
What could I expect to be able to borrow?
Also would lending figures differ if I looked into a shared ownership property?
thanks
Gab

@gabby71 Ignoring any other factors, based on the limited info in your post you should be able to borrow in the region of 4-4.5 times total income (salary + PIP).

Plenty of mainstream lenders will take PIP at 100%, just need the current award letter. The current credit commitments you have are fairly minor so whether you clear them or not is unlikely to affect your max borrowing in a material way.

Just for your information, the car loan will be judged on the monthly outgoing and the credit card commitment is calculated as a monthly outgoing of x% (diiffers from lender to lender) of the outstanding balance, even if it's at 0% currently. So to maximise potential borrowing on your mortgage, try to keep these to a minimum.

Question for you as I can see that you are a mortgage advisor - why did you say 4 to 4.5x not 4 - 5.0x as I thought 5.0x the income was possible in terms of loan amount or has the rule changed?

Thanks in advance.

K_S

@hollyrottweiler My thoughts above were just intended to give a ballpark figure to the OP based on the limited information in her post.

I'm not sure which rule you are referring to but you are right that 5x and even 5.5x LTI mortgages are indeed available from some lenders if you meet certain criteria (minimum salary, LTV limits, certain professions, etc) and of course the affordability calculations for your circumstances.

[Deleted User]

K_S said:

@hollyrottweiler My thoughts above were just intended to give a ballpark figure to the OP based on the limited information in her post.

I'm not sure which rule you are referring to but you are right that 5x and even 5.5x LTI mortgages are indeed available from some lenders if you meet certain criteria (minimum salary, LTV limits, certain professions, etc) and of course the affordability calculations for your circumstances.

Thanks, you've answered my question there. I was just curious if lenders aren't lending at 5.0x anymore as I'm not familiar with mortgages anymore so thought I'd ask to clarify.

You mentioned certain professions, do lenders really take these into account? Never thought of that! (but makes sense)

K_S

@holyrottweiler Not all lenders. A few do have products that are available only to some professions (doctors, accountants, engineers, etc etc). For instance the Scottish Widows product here https://adviser.scottishwidows.co.uk/products/mortgages/professional-mortgage.html#