I want to borrow the maximum possible for a mortgage
The house buying process is a complex one and can involve: agents; banks; brokers; solicitors; insurers and in the case of buy-to-lets the taxman so you may have a lot to contend with. So before you start running around and incurring cost you need to know where you stand with the mortgage finance and in particular the level you are able to borrow up to.
In this article I will provide an insight to the level of borrowing you might typically expect to achieve and how to improve the situation to borrow above this level.
Firstly, I need to stress that a mortgage is a long term commitment and if your income is inflated for a period, for instance, overtime is readily available at Christmas but might not be available in the New Year, then you need to be mindful of this and work on sustainable income otherwise you could over stretch yourself.
So what do you if you really want to get the maximum mortgage possible?
This can form a good platform for understanding your borrowing level. Importantly it focuses you on your outgoings as well as income, however, they do tend to be basic and apply a broad brush approach rather than provide a meaningful figure. If you type in ‘mortgage affordability calculators’ online you will inevitably get back a whole host of responses. The most accurate are normally the lender’s own individual versions as they are bespoke to their methodology but this will mean a lot of re-inputting as they will not provide comparisons for other lenders.
In the background the online calculators often apply multiples of your income as a limitation. With results varying between 3 to 5 times your sustainable income.
Approach your own bank
A typical start point for mortgage applicants is to approach the bank they have a current account with. There is the odd bank that provide preferential terms on the basis of the historic relationship but you can count these on one hand, most apply the same affordability rules as they would for new customers.
Approaching a singular bank also has the other problem that you are beholden to their limited product range and as such are likely to be paying over the odds.
Talk to a mortgage professional
There are plenty of Mortgage Brokers who are willing to provide their opinion. Some charge for their advice up front and others concentrate on specific areas so be careful in your selection. We specialise in applicants looking to borrow the maximum and have the experience in selecting lenders accordingly. This means we will cut to the chase rather than have you hanging around for days in the darkness.
Below are a couple of examples of the methodology that lender’s apply when providing a decision on the maximum mortgage borrowing. Bear in mind we are applying solutions from the best case scenarios taken from all the UK lenders and applying our experience, and to the untrained the income multiples specified are likely to be much lower.
Example 1: Of how lenders assess affordability
Earns £68,000 a year and also gets an annual bonus of £10,000. Applicant one is looking for a 90% loan to value mortgage and has got two children he is also married but his wife does not work and is a stay at home mum to look after the children. One of his children also goes to nursery twice a week which costs approximately £400 a month. The applicant also has pension deducted from his salary at source.
This applicant is a young lady who is currently renting and is on £35,000 a year. This applicant receives £10,000 annual commission which is paid to her on a monthly basis. She’s not married and does not have any children or outstanding credit card debts. However she does have a £7000 student loan. This applicant is also looking for a 90% mortgage and the deposit is partly funded by parents.
Looking at the scenario Applicant 1 earns significantly more than Applicant 2 but because of his dependents and pension deduction it likely that the lender will apply a lower income multiple than Applicant 2. My estimate would be Applicant 2 will probably achieve 5 to 6 times her salary whereas Applicant 1 will probably be stuck with 4.5 to 5 times his.
Example 2: Of how lenders assess affordability
First time worker, single and first time buyer. Salary £20,000 per annum. Impeccable credit history.
Homeowner and single. Salary £40,000 per annum. 1 outstanding county court judgment for £3,000.
In this instance Applicant 1 would probably be looking at 5.5 to 6 times his income. For Applicant 2 the credit history is likely to limit his chances to 4 to 4.5 times his income.
Approaching somebody who was dealt with the systems processes and the underwriting decisions before an application before and after application is key.
If you are generally looking to get a mortgage and need some specialist advice and guidance throughout the process then we are the right people to talk to as we do not charge upfront for any of our mortgages.
I hope you have found this article useful and if so please help us by sharing the information found on this site with your friends and family.
For more information on getting the maximum possible for a mortgage please contact us on (020) 7993 2044 or alternatively complete the online enquiry form on the right-hand side of this page.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.