Solutions on minimising the impact of children on your Mortgage affordability.
“Once upon a time” is how the children stories go: getting a mortgage with or without children made no difference. Then the mortgage affordability assessment was based on the multiplication of your income. A blunt tool but it served its purpose at the time. It started out at 2.75 x the main earner’s salary plus once the secondary earner. The society norm and expectation was the second applicant would be part-time with the ability to fully take on child care responsibilities; so it rarely became a consideration for the mortgage assessment.
Fast forward to the “twenty twenties” and with both parents often working; children and child care costs are often seen by Lenders as the main consideration. To counteract this barrier the affordability calculations have developed to factor in monthly commitments specifically to the applicant. The tradition two-point four families are likely to attract between 4 to 5 times income and a singleton with no children on a decent salary up to 6 times.
As a professional Mortgage Broker, I pride myself on choosing the right bank or building society to work with depending on the number of children and child care costs you have. Below are some of the edges and approaches my panel of Mortgage Lenders offer which could give you extra borrowing capacity when it comes to how children affect mortgage applications and lending rules.
Some major criteria around Mortgage Lenders that:
- cap their affordability deductions at three children. So if for instance, you have five children there would be no consideration for bringing up the other two.
- run their outgoings against National Statistics. So if you spend more on consumables than the average household it could work out better for you.
- ignore child care voucher deductions on payslips.
- discount private school fees.
- lend on the basis nursery fees are ignored if ending in September.
- add child benefit payments to your income (depending on the child’s age).
- take Child Tax Credits.
- ignore the costs for children at University.
- ignore children who are financially independent.
- will accept grandparents have a role to play in child care.
- do not drill down to factor in after school and holiday clubs.
- don’t question every transaction through “Parentpay”
- understand that moving closer to the school can reduce your ongoings in care and commuting.
- don’t deduct voluntary donations to the school.
- Understanding and applying these rules can make a real difference. So if you are looking for a mortgage with and without children give us a call.
If you need further information on how children affect mortgage applications and lending criteria rules please do get in contact.