There is more than one answer to this question.
Certainly, in the past, it was possible to borrow more than you might actually be able to afford. However, since 2008 new mortgage lending criteria has been introduced in order that affordability is properly tested by various stress analysis calculations based on theoretical increases in interest rates or loss of overtime or other income.
This all sounds very technical but the upshot is that a mortgage lender will look at several things when deciding how much you can borrow. These will include assessments based on;
- What is the Loan to Value Ratio? In other words how big a deposit can you put down. Most lenders want to see 5 - 10% deposit as a bare minimum.
- What element of disposable income does your household have after basic monthly expenditure and how much income is dependent on variables (i.e. a second income or bonuses and overtime).
- How big an effect will a notional increase in interest rates have on the monthly repayment and can your household afford this increase?
- How much can you borrow based on the lender’s criteria. Most mortgage lenders have fixed criteria based on a multiplier of the household’s main income. Others will allow for a smaller multiplier on a second income in the household.
Most lenders have an “Affordability Calculator” to help you work this out, but it In conclusion, it is impossible to offer a comprehensive answer here unless we have all of your information. This is one of the primary reasons why employing an independent mortgage advisor is so important.
For an obligation-free consultation and informal chat, contact our team of mortgage advisers in Maidenhead on 01628 507477.
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