How does the affordability thing work wrt mortgages?

[KatyMac]

As I rang the mortgage company recently to borrow more & they said they wouldn't even make a record of the call as we don't earn enough to borrow what we have never mind any more

So is there a website or tool that tells you how much you can borrow?

Each mortgage provider has their own way to calculate it, I know some let you work it out for yourself on their websites.

Oh poo

That's not fair I know life isn't

It does vary between lenders. I had my affordability checked recently and one lender would give me £25K max, another £124K. Different lending criteria, but the bottom line was I'd never be able to afford the mortgage on £124K. £25K wouldn't get me another home if I was to sell my flat. My current mortgage lender's own calculator won't now lend me what my outstanding mortgage is sitting at. They gave me a much higher amount 2 years ago than it's sitting at just now so I have a mortgage with them for higher than they would now lend me. Bonkers.

It used to be roughly three times your salary.

Pretty sure the comparison sites like money supermarket will pull this altogether on one page for you and tell you what you can borrow from each lender based on your income?

Our lender told us it was 90% of what the house is currently worth, so we've actually got more than what they would lend us now

Madness isn't it?

There are a few tests they look at (this is all ime as researched my remortgage recently)

Salary multiples - can be anything from 2-4 times salary

Affordability - what other outgoings you have ie can you actually afford it after other debts, bills etc

LTV (loan to value) - ie how much you want to borrow vs house value. The lower the LTV the better deals you usually get. Some lenders won't lend above about 75%

Very few mortgages at 90% atm.
Most are max 85 and the best deals are 65 and below.

OK I owe about 35% on my mortgage with 5 years to run; I also owe about 15% of my house value as CC debt

I'm about to need (in about 2/3 years) another 20% of the house value

I'm stuffed aren't I?

Not really possible to say without salary details and because who knows what the mortgage market and house value might be like in 2 years time!

But it doesn't sound too bad re mortgage. The 15% of house value as cc debt sounds bad though. Pretty sure they'll want to take that into account, but overall it all comes to 70% which diesn't sound so bad to my untrained ear?

Is your current mortgage a repayment mortgage, if so in 2 years time the amount you owe will be lower. Also assuming you have a few more years before retirement you could extend it from the remaining 5 years to longer.

Try putting it all in here and see what they come up with
www.moneysupermarket.com/mortgages/

I'm paying off the debt gradually but every time the end is in sight something goes wrong

DH retires in 5 yrs & that is when the mortgage should be paid off - I'm SE & while it provides a reasonable standard of living it isn't providing a wage for borrowing against

I may have to give up & go & get a job

Surprisingly enough our current mortgage provider says they would lend us more on MSE even if when I phoned them they said no

There are lenders that are happy to take self-employed earnings into account. Have you spoken to an independent mortgage advisor? They can sort through the offers on the market for you & present you with some options rather than you having to hunt about yourself.

Katy rather than remortgage to release funds (and yes it was very very easy to do a few years back!) how about getting a 0% interest cc? Just be a card tart and keep moving the balance til it's paid off?
Is your current cc debt on such a card?
We just moved our cc bal to virgn money -0% for 16 months and only 1.99% fee which I thought was pretty good.
It will give dh and I the breathing space we need.
Good luck
Have you tried London and country btw?

It's already all on 0% (& no I don't add to it) - thanks for the suggestion tho' it might have helped (well some of it is on 7% for the life of the loan - which is good)

Very few companies will have us because of DH's income (it's an insurance) - but I thought it interesting that our company would do it for new business.........

I need to save more or earn more I think

You will probably need at least 3 years of accounts if you are self employed. Unless you are using the money released from the mortgage to pay off debts that will be deducted from what you can borrow (which varies from 2 x income to 5 x income). Different lenders will have different policies. Some will deduct your other financial commitments from your monthly or annual income and then do the multiple, others will do the multiple and then deduct the other borrowing.

It is worth knowing that any borrowing you have showing on your credit report, including those that you're not using, may be taken into account when calculating affordability. For example if you have £12,000 on a cc with a credit limit of £18,000 plus 3 other cc you're not using but have £10,000 credit limit the lender sees you have the potential to run up £48,000 in unsecured debt. If you were to use all that credit you would probably struggle to pay the mortgage too. So close off any credit you're not using for it to be disregarded.

You may be better off with a personal loan - you can borrow up to £25,000 unsecured although the rates are high and max repayment term tends to be 8 years.

I would also contact London & County brokers to see if you can remortgage and borrow more elsewhere.

I used to underwrite mortgages for a living. Normally the affordability calculator takes into account your mortgage payment, and other monthly commitments up to a set percentage of your take home pay.

The 'other monthly commitments' will include CSA/Council Tax/Minimum monthly repayment of your C/Cards/Loan Repayments, etc etc.

Underwriters will also look at many other aspects of the application. Not solely the affordability calculator.

Thanks - I think I am just a bit down

Then end is in sight (I hope)

Loan paid off in Nov
Shorter term CC paid off next June
Longer term CC Nov 13
Debt free Jan 15
Mortgage free Sept 17

No one will lean me anything as a loan - I have too much available credit

Damn

I meant loan

& I rang one of those debt management charities who are sending me a spreadsheet so I can work out what I am spending; I know exactly what I am spending