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 .

@Lazypuppy

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.

I know I am , im acting bonkers I know I am . I wish we could iron out the creases before we apply but the market is so scary right now and we are in the south east so it's silly money . We are at bare minimum for where we want x

@PureBlackVoid

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.

The online calculators say we can borrow more than our income . We think 480 they are saying 565 . I don't trust it

10k for just having kids,mine aren’t in childcare,that was NatWest though.

A broker will be able to give you a very good idea of what you can borrow without applying first- it really is best to speak to them as they have their finger on the pulse and know what each bank’s criteria will be. It doesn’t cost anything to ask them for advice, just when they get you the offer.

I got a 95% mortgage on a flat with about 7k of credit card debt, using a broker. It can be done. I had a less than ideal but not ruinous interest rate for the first two years then at the end of the fixed term I was able to get a better deal. For those 2 years I was able to make a good dent in the debts because the mortgage payments were still less than rent. And the extra couple of percent on my interest rate cost me less than the increase in the value of my flat in that time. Most people who give money advice on the internet are extremely risk averse and tend to forget that there is also a cost in delaying buying. I wouldn't be able to buy in my area at all now, so leaving it would have been extremely expensive, and since rent almost always goes up not down it would be getting even harder every year.

But your broker should be able to advise you on all of this. If they can't give you any helpful guidance on where you stand with a bit of credit card debt they aren't a very good broker.

Have you had a look on Halifax? They have an online calculator but also make you put in fact/ outgoings.

As people suggested try a broker or get an agreement in principle (AIP) from a mainstream bank. That will give you a good starting point. I would do it now and see what they say before you make any decisions! It's probably better to buy sooner rather than later if you're 40 already since you can get a 25 year mortgage. If you wait then your age could cause you more trouble than the debt you have.

I did a Lloyds AIP recently and it took 15 min and was a pretty good reflection of what they were willing to lend.

@SeasonFinale

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.

In England, they don't count student loan as debt and it is ignored in calculations although they do still ask if you have any and rough amount. I was pleasantly surprised when my broker told me

Again thanks all for your help . We are contacting the broker tomorrow .

@blacklilypad I didn't say they treat student loans as debt. I actually said this. They do however take into account the actual repayments made in the affordability calculations and this is one area Martin Lewis never explains properly which he should.