eligibility for a mortgage

Discussion in 'Finance, Property, Law' started by fadingtan, Dec 30, 2005.

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  1. When I last got a mortgage the amount you could borrow was generally assessed purely on your income, I recall the ratio was 3x your annual income or 2x joint income for joint applicants.

    I hear that recently the mortgage colmpanies are more enlightened and now look at how much you can afford to pay rather than how much you earn.

    A few Q's then:-

    Is this true?

    If so is it purely on your ability to pay evidenced by past bank statements etc showing that you have kept in the black for the past x months/years and there are no obvious reasons why this would change or do you still have to provide evidence of guaranteed income?

    Are these particular types of mortgage or do the assessment rules apply to all types (fixed/discount, repayment, interest only etc)?

    If it is based on your ability to pay how is this calculated, what fixed and variable income and outgoings are taken into account?

    if only selected lenders use this assessment method then who are they?

    many thanks for any answers.
  2. There's a guide to the basics here. Beyond that, it's always worth using Google for answers to specific questions, 'cos there are lots of useful pages on t'internet.

  3. It's all very much dependant on who you take your mortgage with. Why not give a few companies a call they will be more than happy to assist you. As for the above on how much you can afford to pay. I believe you can Self Cert.... which means you may be making extortionate payments but as long as you can afford to, you can more or less get a mortgage for any amount, you just have to be able to make the re-payments. This has come about to allow the lower earners to get on to the property ladder i believe.
  4. You still shouldn't expect to get a mortgage for more than 3 1/2 times your salary.

    Otherwise people would claim that they could live like a monk and pay off a few grand a month.

    Another factor to bear in mind is the amount you can borrow will be reduced by other loans/credit card bills you have. Suddenly that car, stereo and Plasma TV you have on flick is not such a good idea.

    OB has the right idea. Go and chat with prospective lenders.
  5. Fad,

    There are some lenders out there who will offer you much higher income multiples. It's up to you to know what you can afford and be disciplined enough to turn them down.

    If you haven't reviewed your budget for a while then doing this will give you an accurate picture of what you can afford. The other trick is to seek mortgage offers before you look for property. It is much harder to turn down a bigger loan when you or your other half set your heart on a place.

    Another factor in how much the lender will offer is of course your deposit. Beware the lure of the 100% mortgage. These put you at risk of negative equity, perhaps almost immediately if house prices slip. Plus these loans are almost certain to attract higher interest rates than usual and a high mortgage fee and the dreaded mortgage indemnity guarantee.

    If you need any more generic info on any of this, let me know.

  6. BiscuitsAB

    BiscuitsAB LE Moderator

    To get the full picture on mortgages and mortgage related matters speak to and Indepedant Financial Advisor in your area and if you dont know any then go to www.unbiased.co.uk where you will be provided with a short list of Independant Financial Advisors in your area.

    If you contact and advisor through that website you should get at least 1/2 of unbilled time and possibly up to an hour.