How much can you borrow?
Since the Mortgage Market Review, Lenders must ensure that you can afford your mortgage repayments, now and also if interest rates go up in future.
Spending on childcare, entertainment, running your car, and, gym membership is as important as fixed monthly outlay such as utility bills and loans. Lenders calculate how much to lend based on both your income and outgoings – so the more you are committed to spend each month, the less you can borrow.
How do I find out my maximum mortgage?
Most lenders have a web-based affordability calculator, providing useful guidance. Alternatively, speak to a Mortgage Broker who can do the same, but across a range of lenders - borrowing amounts can vary from one lender to another.
Serious about buying? An agreement in principle (AIP) can help. It’s a mini application + credit check that generates a “high level” decision. An AIP is simply an indicator, of what you can borrow, based on some of the basic criteria applied by a Lender, so never assume that it’s binding - you won’t get a fully accurate figure until you apply for a mortgage, but an AIP will determine, if you’re the type of borrower that a lender is looking for.
Filling in an AIP form accurately is extremely important and this is where a Mortgage Broker can guide you.
Can I make myself more attractive to lenders?
In a word “Yes”! Use your bank statements to identify your spending patterns over the last 3 months. If you’re constantly maxing out your overdraft, using payday loans, or having direct debits returned, you’re unlikely to be first in a Lenders’ queue when it comes to dashing the cash!
Lenders are more comfortable if you can demonstrate you live within your means – so be sensible.
How much should I be borrowing?
Finding out what you can borrow is all well and good but you must also be realistic about how much you can afford. A Budget Planner is a great starting point and will help you to work out your monthly disposable income after everything’s been paid.
Enter your take home pay and your commitments and be sure to factor in contingency money for unexpected costs – if your boiler breaks own or your car needs repairing, you’ll need money to pay for this, without it affecting your mortgage repayments. Add up your spending and deduct the total from your pay, the figure remaining will give you an idea of what you have to use for mortgage repayments.
You may be surprised at what you’re hard earned cash is spent on each month! Adjusting spending habits on non-essentials, such as entertainment, eating out, can boost your net disposable income – but only do this is if you can be sure you’ll stick to a tougher regime!
For more information visit the Mortgage Bureau website www.mortgagebureau.net, or speak to one of our team of advisers on 0844 22 54321. Calls to 0844 numbers are charged at 3p per minute plus your telephone company’s access charge.
Your home may be repossessed if you do not keep up repayments on your mortgage.
If you arrange a mortgage on a property from one of our associated new homes developers, we will waive our fee, otherwise there will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. MAB 7533