Cannot get a clear answer on our budget/mortgage limit?

[united4ever]

Hi, I have agreed a sale on my place and am looking for houses. I am finding it really hard to establish what my true budget is? There is a real nice house we have seen which we think we could get for 280k. I made a phone call to the nat west and they asked about 5 minutes of questions over the phone and sent me a letter stating they could lend me £171k which if I add to the equity from my house sale and savings means I can go up to £265k.

This letter they sent is (as I understand it) a Mortgage offer in principal. It was done over 30 year term and represents more or less 5 times our joint income. This seems a lot I know. 2 questions – do you think we could get it increased via an alternative lender and if so who?

The reason I ended up contacting the nat west is that I went to see a mortgage advisor and he basically went straight to the nat west mortgage calculator. I have used another independent, whole of market mortgage advisor in the past year on proposed sales which ultimately fell through – she could only get me a mortgage for 25k less than the nat west are offering even though we made it clear we would like to know what the top of our budget was. Which makes me wonder if the nat west deal is too good to be true or if the financial advisor we used in the past was coming up with products different to what we asked.

I understand it’s a risk to push your budget too far. We are hoping this next move will be our last so don’t really want to buy a smaller house which we will outgrow and then have to do it all again in a few years.

Would just like to establish what our real budget is so we don't waste time looking at houses we can't afford or miss out on houses that we later realise we could afford.

Based on what you say above, you have a joint income of 34k? I typed that into the Lloyds bank mortgage calculator and with no debts and monthly bills of 200 (council tax, water etc) and no debts, they would lend 130k over 30 years so compared to Natwest, it seems you had a good offer. Is this correct? Joint income of 34k and no debts?

more a less yes about 34k.....how likely are a bank to honour their mortgage offer in principal? Is it almost certain if you provide all the evidence for income and the house you find is at a reasonable price\condition?

I don't think we can stretch to 280k then probably best to stick to the 265k budget?

In my experience the AIP is always honoured as long as you have told the truth and have everything to back it up. Do you already bank with Natwest? Perhaps speak to whomever you bank with if not and see what they can do? We moved last March and went with our bank, we didn't need to provide bank statements/payslips at all as they had our banking history and we had a good credit score.

In regards to your budget, if you have 265k then I would suggest perhaps looking for something under the 250k mark that you could add value to with the other 15k, this will reduce the stamp duty too.

don't bank with them (my parents have banked with them for 40 years - can't see that making any difference). Might check HSBC who I bank with then (First Direct). Yeas, the stamp duty is something I am keen to avoid so may look at a bit lower. There is this one house which we love but it's on at 325. Estate agent assures us it would need 280 at least (more as a starting point really) even though it's been on the market for over a year and been reduced once already.

"In my experience the AIP is always honoured as long as you have told the truth and have everything to back it up."

The MMR (in particular the requirement for lenders to assess whether customers can afford the mortgage payments) may well change this.

I agree with looking for about £250k. 5 times joint incomes was unheard of years ago. We had 3 x DH + 1 x mine. I am pleased we had a life and money for contingencies and improvements and, unlike a lot of our friends, furniture and holidays! You have to live a bit!

Be careful - some calculators expect you to put in your NET income, not gross. Of course, if you put in your gross income, you'd get a much higher offer...

I think we've got about 5x from Santander - try their site by googling Santander Intermediaries which includes the affordability test. We got our Agreement in Principle since MMR so hopefully it'll all work out ok.