What mortgage can I get with my salary?
One of the main conversations we have with clients is on the subject of what is the maximum they are able to borrow or if they are able to get the amount they wish to borrow. Of course, this is one of the key elements of proceeding with your plans or knowing what your plans may need to be, such as what price range you can consider for your purchase based on the results.
What mortgage can I afford?
Knowing what you can borrow is one thing, but knowing what you can afford can be a completely different thing altogether. Everyone’s circumstances are different, and as such, we will all have a different view on what we feel we can afford in regard to our monthly mortgage payment. Affordability opinions can also differ between what you feel you can afford to what a lender assesses as your affordability. While a lender will go through much of your income and expenditure or, in some cases, use the information provided by the Office of National Statistics to get a general view, they will not know your exact spending habits in the same way that you do. When a lender calculates what they feel you can afford they take into account certain things. Some of the main ones are:
Income – this can be from a variety of sources such as a salary, self-employed income, benefits, maintenance, and for some, even investment income such as rents received.
Number of dependants – this does not necessarily solely relate to children but can also be an adult that is dependent on your income. Certain assumptions or figures for the Office of National Statistics are used to calculate how much of a financial commitment a dependant is.
Credit commitments – this is how much you pay for your contractual credit commitments such as loan payments, lease agreements, HP agreements, and not to forget any buy now pay later finance. Your credit card balances will also be taken into consideration, with most lenders taking the monthly commitment as between 3% – 5% of the balance outstanding at the time of application. This is regardless of your monthly payments, which may be different. Other payments, such as any agreed maintenance, will also be taken into account.
Travel – some lenders will predetermine a certain amount for expected travel costs; however, some will ask you what you actually spend or will likely spend after your move. It may also be that you pay for an annual travel or rail pass.
Council tax – again, some lenders will build this into their automatic assessment; however, some will ask what this is or what it will be on a monthly basis following a house purchase.
Other mortgages – the mortgage you are enquiring about may not be your only one following completion, and as such, lenders will want to know about any other mortgages you will have remaining and, where applicable, what rents you receive.
Your age – this will dictate what term you are able to take your mortgage over. The term of a repayment mortgage can have an impact on the amount of the monthly payment, i.e. the longer the term, the lower the payment, and your age will play its part.
Property value and loan amount – by having an indication of this, the lender can assess what the expected loan to value (LTV) will be. The lower this is, the lesser risk you propose to the lender and,, in turn, the more they may be prepared to lend to you.