affordablility mortgages..?

pavlovs_dog

please can someone explain to me (in simple terms) how affordability mortgages work?

how do banks/ mortgage providers assess what you can afford to pay each month? what do they consider? and how does this method compare toother methods of financing a house purchase?

im still fairly new to this stuff, so i want to get my head around it all before the time comes to start thinking about it seriously

thankies in advance

payless

edit ..was planning to be brief, but its hard ( especially after a glass of wine or 2)

some lenders will look at your net or household income and consider how much mortgage this is substain , after accounting for other expenses, at current compartative low rates this may produce a higher figure than of old
( but care rates can rise)

ie a food bill for someone on £20K might be the same as someone on £10K, so they can afford a more than x2 mortgage amount.

Different lenders have different methods, taking different things into account- like number of adults & children in a property, other commitments, and if taking a long term fixed rate

Some are also based on credit scores

In summary at the moment it appears that lenders who use an affordability matrix will usually lend more for a medium to high earner ( or couple) with an average to high credit score than the lenders using more tradiational method

Some lenders make their calculations known - ie x --___income , rising to x___ income if income over x, - some give examples on websites and spreadsheets , some are more vague until after a credit score

( NOTE- only borropw what you can afford to repay)

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there's at least one major lender who offers a self certifying affordability based mortgage ( at a premium to mainstream rates) , whereby only disposable income is declared BUT CARE see http://www.fsa.gov.uk/consumer/07_MORTGAGES/getting_started/selfcertification.html