‘How much can I borrow’ tends to be the most asked question of anyone at AToM! Only a few years ago, that could easily have been up to 8 x income with the minimal of fuss subject of course to loan to value and certainty of income! Oh, how things have changed, and rightly so! Those were times with little control and the lengthy recession subsequently bore testament!
Today it is so much more intense! For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, lottery payments and gym membership! From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you. However, on the other side, not only can it be restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!
The lender has a duty of care to make sure you can afford your mortgage today, as well as when rates rise and specifically to it being considered affordable over a 5 year period.
But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.
We have seen the phasing out of income multiples and the introduction of affordability models. So, no more straight forward 4 or 5 x income discussions. The amount you can borrow will depend on your monthly net income set against expenditure and living costs.
However, this also works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more if you fit their specific affordability model. Some we’ve seen have been well in excess of 6 x income.
With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures. So, beware if you are in a rush!
Finally, the holiday period is fast approaching and do take time to dig out that paperwork and come and have a chat. With rates so low, now might be a good time to be exploring these options and it could be a very beneficial exercise right before Christmas!