Unsurprisingly, this is one of, if not THE main question that people ask when it comes to mortgages. When you know how much you can borrow, you’ll be able to search the market to see the types of properties you can choose from in the area you want to live. For many people, knowing what they can borrow is what starts to bring the whole property-owning dream to life.
You may have been told by long-time mortgage holders that you can get a mortgage of 4.5 times your annual income. So, if you earned £30,000 a year you could borrow £135,000. Well, they would be kinda wrong, but also kinda right. Let’s delve into this a little deeper.
Back in 2014, the mortgage market had a really big review. It was called….wait for it…drum roll please…the Mortgage Market Review…bet you didn’t see that name coming did you…….
Well, this big review made changes to how lenders work out affordability. They were told to no longer use multiples of salaries and instead to take ALL your details into account to work out your affordability. This was a really big change to how things had always been done, so lenders had to review all their policies when it came to decision making.
Some lenders now work solely from budget planners which allow for greater multiples of income. Mortgages lent using this method sometimes work out to be beyond 6 times the annual salary, although this is typically reserved for higher income earners or professionals with guaranteed increases in income like Teachers, Doctors and Accountants.
The principle of income multiples remained with many lenders, typically offering between 4 and 5 times the annual salary. The difference now is that more emphasis is placed on debts, general expenditure such as food and bills and the household make up.
So, in short, to truly know your affordability you would need to approach every lender in the market to see what they would offer you. Now, we’re sure you don’t have time to do that much research, which is why using a mortgage broker, ideally, one who can search the whole of the market, will save you a bucketload of time.
We hope this short article gives you hope and if you would like to discuss your options with a human being, then our team at Robin Mortgage Design would be happy to help. Just give us a call on 0333 242 3863, alternatively, you can fill out our online enquiry form, and we’ll be in touch.
Written by Mark Travell, Director of Robin Mortgage Design
Now it’s time for the legal bit: YOUR HOME BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE PAYMENTS
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