|
Mortgage? Remortgage? Contact
this mortgage specialist for the best deal for you. No fee option
How much can you borrow?
Most lenders base the
amount they will lend you on your income. Most apply a set salary multiple to
your earnings, so if you find out what the multiple is you work out the maximum
loan. The vast majority of lenders offer
lone borrowers a mortgage of
around 3 to 3.5 times their salary.
Joint borrowers can
choose to take typically 3.5 times the first salary plus the second salary, or 2.75 times
their combined salary. Which you choose
depends on how much you earn.
For a couple earning £25,000 and £28,000 adding the salaries together and
multiplying the total will work out better. For a couple earning £40,000 and
£13,000, multiplying the larger salary by 3.5 and adding the second will be a
better option.
If this
isn't going to be enough, you
may
be able to get an enhanced income multiple.
Some lenders are willing to
offer up to four times salary in cases where borrowers are able to afford the
repayments.
Many limit the risk they are taking by making these loans available only to
those who have a large deposit to put down - often at least 20 per cent. However
other lenders will lend up to 130% of the property in certain circumstances
Affordability
Lenders are required to be
satisfied that the borrowers can afford to make the repayments. They will
require affordability checks to be carried out. This takes into account the
borrowers existing commitments, such as existing debts.
Existing debts
Before a lender applies its lending multiple to your earnings it will ask about
your financial commitments. Regular repayments on personal loans or credit cards
can have a big impact on the amount you can borrow.
Take, for example, a personal loan of £5,000 being repaid at a rate of £100 a
month. The lender will add up your annual payments - £1,200 - and subtract this
from your salary. If you earn £28,000 your lender will apply its salary multiple
to £26,800, and if it offer 3.5 times salary the amount you can borrow will be
reduced from £98,000 to £93,800.
Credit card repayments are treated in a similar fashion. The lender will take
the minimum monthly repayment, usually 5 per cent, and multiply this by 12,
before subtracting the total from your salary. A few unguarded moments in your
favourite shopping centre could dramatically reduce the amount you can afford to
spend on a property.
As well as the maximum
salary multiple, the size of deposit you can afford to put down will also
influence your choice of lender.
All have rules on the maximum loan to value (LTV) they will offer - that is, the
most they will lend as a percentage of the property. Many limit lending to 95
per cent LTV, meaning you need to have at least 5 per cent of the purchase price
to put down as a deposit.
There are, though, lenders who are prepared to go beyond 95 per cent LTV on some
of their loans. Several offer borrowers 100 per cent mortgages, and a small
number offer even more, giving you enough to buy the property and meet some of
the associated costs.
One drawback with these larger loans is the rates tend not to be the best on the
market. In fact, all lenders offer their best deals to the borrowers with the
largest deposits. If you have at least 25 per cent to put down you should have
the pick of the mortgage market.
Self
Certified Mortgages
'Self Cert'
Mortgages are available from lenders for those borrowers who cannot readily
prove their income. It is important that the income quoted is accurate and
that the borrower can afford the repayments. Lenders use specific criteria
to determine whether they think a mortgage would be affordable.
Click here for mortgage advice
Back to top
| 
