MSE How much can I borrow? calculator - seems very low

lolaclare

I am thinking about moving, and have been looking around to see what is available nearby, and have done a few online 'How much can I borrow?' type calculators to get an idea of the ballpark house prices we can be looking at. On most calculators (on Nationwide website, Money Supermarket etc.) I am told we can borrow up to around £345k. The houses I have been looking at mostly involve a mortgage of around £300k (we will also have around £120k deposit from the sale of our current house). But the one on the Money Saving Expert website is telling me we can only borrow up to £235k - why is it so much lower? Is it because it doesn't ask about deposit size, and does the LTV that make a big difference?

Snookie12cat

As a general rule you can borrow between 4 - 5x your salary. Then loans and commitments are deducted further from that.

GentleGiant01

For a mortgage of 300k you’ll be needing to earn around £60-75k per annum. If you have any debts, this will likely be higher. 

Most lenders tend to lend 4.49x your wage so for example: 

lender allows 4.49x wage and you earn £67k - you can get a mortgage of £300k. If you have £10k car finance and 15k credit card debt not going to be paid off before completion, most companies will then reduce the amount you can borrow by £25k - making the max £275k. 

There are lenders who will go 5 and 6 times your wage but you will probably need a broker if this is what you need as some have certain criteria. 

Hope this is somewhat helpful  

GentleGiant01

Also worth noting - if you have any adverse credit this can effect your loan amount, but with such a large deposit I will imagine this is minimal 

lolaclare

Thanks, yes it is helpful.

My husband and I earn £72.5k between us and will probably have a deposit of ~£120k. We have no real debt other that our current mortage.

I'm just confused by the MSE calculator being so much lower than the other ones I have used (the others seem to be more along the lines you have described - around 5x earnings).

getmore4less

lolaclare said:

Thanks, yes it is helpful.

My husband and I earn £72.5k between us and will probably have a deposit of ~£120k. We have no real debt other that our current mortage.

I'm just confused by the MSE calculator being so much lower than the other ones I have used (the others seem to be more along the lines you have described - around 5x earnings).

MSE calculator uses 2.5x-3.5x  to get the range and then 4x for the max.

Most if not all the MSE calculators have flaws that can lead to the wrong products.