Have a DIP but its 5x our salary?

madhatter83

Have recently completed a DIP with nationwide whom we currently have a mortgage, They said they will lend us up to £265k, but I make that approx 5x combined salary. 

I thought 4.5x was max for affordability checks in general? I have double checked our salary figures and they are correct.

We have a sizable deposit and a LTV of 73% if that makes a difference.. 

A little concerned that we go make offers on a property and will fail at mortgage application stage due to affordability? the problem is the houses we want are in the price range where we do need that larger sum. 

Anyone else been offered a DIP above 4.5x salary then not passed the checks at application stage? 

Emmia

Whilst you have a DIP for five figures, that doesn't mean you have to buy a property of that value.

What would the monthly repayments be on that mortgage size? Would the budget / your incomes work with the other costs of the property, larger homes are usually more expensive to heat, and CT will also probably be higher. What wouldn't you be able to do if you borrow and repay more - holidays,  new car, sky TV etc.

How secure is your income? Any opportunities to increase it in the near future?

madhatter83

We have done the sums and it would be workable, we have 105k left on a 6 and a half year fix at 2.5% interest so need t port that across, we live quite frugally to be honest - at the 5X salary we are looking at detached homes, where as at the 4.5x we are looking at semidetached. We are in our early 40s and do not plan to move for a very long time so we really do want detached.

I would say no to increasing income, we have based our borrowing on our income without overtime, so we would have the opportunity to add some overtime income if needed but I do not think we will change jobs. Income Is pretty secure, royal mail and tescos. 

I am just confused why we are being offered 265K on joint salary of approx 53k and if we are likely to actually pass checks at a application stage, failing at application would be a serious pain and if its unlikely we will pass we will have to rethink whats possible regardless of what the DIP is saying.

RelievedSheff

I know everyone is different but we have always worked on our max borrowing being 3 times our combined salaries which leaves lots of room in the monthly budget for enjoying ourselves as well.

We are in the process of buying another house now and have gone just over our usual 3 times rule at 3.2 times but it's still a comfortable amount.

Not sure I would be entirely happy stretching the multiples to 5 times salary if I'm honest. But if you are happy with that, you have the AIP in place so I don't see why you would have any issues at full application stage assuming the information you have supplied is correct. 

silvercar

I can see the advantage of buying a detached house now, rather than settling of something that would see you wanting to move again in a few years time.

Has your recent income included any overtime, so maybe the DIP factors some in? 

madhatter83

No overtime has been added, only regular weekly supplements I get additional to basic pay, i felt if I did not add any overtime (we usualy do maybe £150 a month in OT extra) it might give us a bit of a buffer on affordability when we apply as we could then add it to earnings but ask to borrow the same amount. 

I guess just go with what the DIP says and hope for the best! 

ACG

Earlier this year the govt and FCA worked together to relax some of the rules around income multiples. 

Jemma01

Did you go directly to the bank, or via a broker? If you went directly, the application would be free. If they say no, oh well, you are in a secure home, and didn't lose your money.

The real question is how truly comfortable are you with the monthly payment (which you still need to find out).

feynman33

Don't know how it worked for you but Nationwide didn't give me an 'offer' when i got an official AIP from them, you entered the proposed property price and deposit level and salary etc and they spat out a yay or nae on that specific amount. You can keep raising it till they reject to find out their max, but i'd be a bit nervous about applying at the absolute limit of a AIP, i'd assume any adjustment come full application would likely only go in one direction...

kingstreet

5x is normal for 75% LTV or less.

4.5x applies to higher LTVs.