Affordability

[Bedsheets4knickers]

Can someone explain the affordability process to me as I still don't really understand it fully . We rent and pay a high rent that we could easily double if needed to but that doesn't mean we will get accepted for a mortgage. Let's say we were ready to step on the ladder and the mortgage was £1700 a month . After all our outgoings and fun money we would still have about £1100 spare each month . Is that what it means and is that enough to give us the mortgage ???
I've never fully got my head around this side of it all .

Also I'm very very wrong in my understanding can you explain it in very simple terms as I'm clearly not getting it .

Yes, thats exactly what affordability means. It means that they check that you can afford the repayments, it really is that simple!

Happy house-hunting!

So if we have about 9k in debt but are paying off way over minimum payment every month . Does the 9k make a dent in it ?

Affordability looks at current outgoings, likely future outgoings eg if you are pregnant and builds in a cushion in case (very likely) interest rates rise in the medium term (most people fix for the short term) rates are close to historic lows so do factor in 4-5% at a bare minimum.

Generally they also use the multiple of your income as well, 4x is common.

Oh and before you all ask we've not put the extra we have onto paying of the debt as it was going in the deposit pot

@gogohm

Affordability looks at current outgoings, likely future outgoings eg if you are pregnant and builds in a cushion in case (very likely) interest rates rise in the medium term (most people fix for the short term) rates are close to historic lows so do factor in 4-5% at a bare minimum.

Generally they also use the multiple of your income as well, 4x is common.

Yep got the income side and 4/5% int rates . It's something we've longed for, for so long that now we are here or we think we are here I'm scared to find out 😢. I don't think I can take the rejection

debt usually gets deducted from what you're allowed to borrow so worth considering what you do with that debt, especially as you're likely to be paying more interest on that than gaining in interest from any savings.

@pisspants

debt usually gets deducted from what you're allowed to borrow so worth considering what you do with that debt, especially as you're likely to be paying more interest on that than gaining in interest from any savings.

You see this is where I struggle the debt is 0% so surely the house value would grow enough for that to matter but will they see it like that ??? I'm so scared to find out . Also so pissed with my DP for hiding this debt from me .

We owed 14k on car finance,they deducted 15k from the amount we could borrow,they also deducted 10k for having kids,they also stress tested that we could manage the mortgage payments if the interest rate was 10%

@Fedupbuyer

We owed 14k on car finance,they deducted 15k from the amount we could borrow,they also deducted 10k for having kids,they also stress tested that we could manage the mortgage payments if the interest rate was 10%

Just having kids or having kids in paid childcare ?

I would think very carefully about buying a house with someone who racked up £9k+ in debt and kept it a secret. What is the debt, what did he spend it on?

Don’t forget to budget for repairs and maintenance: annual boiler service, buildings and contents insurance, fixing small problems before they become big problems, etc.

And that's another thing we lease our car but still have the £1100 to play with after all of that . They won't see it like that will they ?

@stuntbubbles

I would think very carefully about buying a house with someone who racked up £9k+ in debt and kept it a secret. What is the debt, what did he spend it on?

Don’t forget to budget for repairs and maintenance: annual boiler service, buildings and contents insurance, fixing small problems before they become big problems, etc.

It was a change in tax laws that his accountant missed so he had underplayed his yearly tax bill by about £13.000 and didn't have enough to fully repay it

Under payed

@stuntbubbles

I would think very carefully about buying a house with someone who racked up £9k+ in debt and kept it a secret. What is the debt, what did he spend it on?

Don’t forget to budget for repairs and maintenance: annual boiler service, buildings and contents insurance, fixing small problems before they become big problems, etc.

Wouldn't that be considered in the 1100 that we had free each month ? How much do other homeowners have free each month for emergencies?

They would also deduct any student loan repayments as outgoings although the actual amount outstanding deducted from what you can borrow.

There are 2 checks - what they will be prepared to lend you. (Amount of debt etc would be deducted from the capital they will lend. Here student loan is not counted).

The outgoings vs income check (here student loans and any other outgoings are deducted as well as "assumed" amounts as mentioned above for dependents etc.

No we haven't got any student loans

We should wait longer shouldn't we ? It's too close for comfort. I'm just worrying about the rate house prices are rising and we are early 40s

Why don't you speak to a broker? You have a high income so if the deposit is in place that's an easy way to find out how much you can borrow.

You shouldn't be paying more than 50 percent debt to income. So less than 50 percent of your net pay should be for mortgage and debts and that's with a stressed interest rate. So a worst case in case rates go up. If you are less than that have a good credit rating and have the disposable you say above you should be fine.

@JackieCollinshasnoauthority

Why don't you speak to a broker? You have a high income so if the deposit is in place that's an easy way to find out how much you can borrow.

We have a broker a very good one that I will use it's more we have the bare minimum deposit and houses are flying around here right now . We will have no wiggle room at all . They've jumped so much in the last 18 months . We have grafted so hard to claw together this deposit but the prices keep growing so we have to keep working . Ideally I'd rather have no debt then apply but if we pay off the dept we can't save then we dont have enough deposit . It's so stressful ive been put on antidepressants. We have a good joint income 110k but it means nothing in the south east right now . It's pennies

@tootiredtospeak

You shouldn't be paying more than 50 percent debt to income. So less than 50 percent of your net pay should be for mortgage and debts and that's with a stressed interest rate. So a worst case in case rates go up. If you are less than that have a good credit rating and have the disposable you say above you should be fine.

We are def not paying anyway near 50% we could if we wanted to but I'm to scared to not save

Online calculators are fairly accurate, in my experience at least. It’s less daunting finding out that way, then having an advisor potentially tell you you can borrow less than you expected!

The ones on bank websites seemed to be more accurate than those available on sites like MSE. You can play around with your outgoings and see if you’d be better off reducing some or all of your debt, having a smaller deposit, longer term etc.

When I last took out a mortgage, I had other debt and I used the calculator to see how much I’d need to reduce the balance by (rather than waiting to clear it in full) in order to borrow the amount I needed and it was accurate when I came to apply properly.

OP just use a broker to get an AIP to show you what you could borrow, then you work from there. You're acting as if you have been refused a mortgage.

Can I just say a quick thank you to you all for taking time out your day to reply to me .
It's calming me down and my anxiety is awful right now xxx