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Prospect Mortgage Services provide independent, sound and honest advice for your mortgage and protection needs.
Over the years, mortgages have become harder to obtain. There now a general perception that you need to be earning big money to even dream of getting a toe on the property ladder. That does not necessarily have to be the case. What lenders are largely looking for is a borrower’s ability to pay their mortgage, which means that even if you have a relatively low income organising a mortgage can be a real possibility.
How will a Lender calculate what they will lend to you?
Every lender will have their own calculation to determine how much they will be prepared to lend to a borrower. Yur Prospect Adviser can help you to find the best mortgage for your situation. By using a mortgage adviser you will be sure that you are borrowing the most that you can, but also that you are working with the best lender for your circumstances. This also means that you are not making unnecessary applications, which can impact on your credit score. This is critical at a time when mortgage lenders can be selective about who they do business with.
Traditional methods for working out your borrowing level
Some lenders still work on the basis of four-five times a joint income (see example 1 below). There is a little variation available in this calculation, where excellent credit ratings are rewarded with a larger loan amount.
Example
| Income 1: Mr Jones | £25,000 |
| Income 2: Mrs Jones | £18,000 |
| Income multiple from lender | 4 x income |
| Maximum mortgage amount | £172,000* |
*Other factors will also determine your maximum borrowing amount including a lenders affordability calculations
With some lenders, single applicants can borrow up to five or six times their salary (see example 2 below).
Example
| Income 1: Mr Jones | £25,000 |
| Income multiple from lender | 5 x income |
| Maximum mortgage amount | £125,000* |
*Other factors will also determine your maximum borrowing amount including a lenders affordability calculations
Mortgages based on affordability
Lenders will usually calculate the amount they will loan to you based on your ‘affordability’. Lenders will assess a person’s income AND outgoings to determine if the person is able to pay their mortgage or not. This could either increase or decrease the actual amount you can borrow, but as some lenders are prepared to consider other forms of income in addition to your salary (for example Child Benefit or Child Maintenance payments) it is possible that your borrowing ability might be higher than first expected. Each lender is different which is why it is recommended that you speak to Prospect Adviser.