What size of mortgage will a lender give me?

Mortgage affordability is always a tricky one.?2022 saw a lot of lenders change their affordability models (some quite frequently) which meant those who perhaps previously had an agreement in principle agreed at a certain level would go and find a property only to find that amount was now no longer within their borrowing reach.?This translated in many properties being remarketed for sale in the 2nd half of last year.?Therefore, checking in regularly with what borrowing level a broker can secure for you is of paramount importance.

When a lender considers affordability, your income is one of the main drivers.?Without an income, there is no mortgage level on a residential basis that can be agreed generally.?

However, there isn’t a set multiple of your income applicable to all lenders to give you an idea of what you can borrow.?Lenders and brokers don’t always help with getting this across.?There are still some basic affordability calculators (a tool used to determine how much you may be able to borrow subject to an agreement in principle) out there.?These thankfully aren’t attached to lenders but do wrongly give the impression that the lenders still use a multiple of the income in the household.

The solution to get your affordability right: always get an agreement in principle from a broker before you start looking for a property or engaging with a remortgage process. Don’t assume because an affordability calculation has been done that the mortgage is a foregone conclusion.

To help understand how a lender gets to the borrowing figure they get to, these are some of the factors that help to determine what size of mortgage a lender would give you:

-?????????Your level of income.?The lower the income the less disposable income you have and therefore the less relative to your income a lender will agree to lend.?This is due to lenders using data such as that published by the Office of National Statistics (ONS). ?As this sees regular living costs generally being the same for everyone then this fixed cost leaves those on a lower salary with less income to afford mortgage payments

-?????????Your credit history.?This varies from lender to lender but it is important if you haven’t taken a mortgage in a while to obtain a credit report.?Blemishes on the report will either exclude some lenders or result in a lower borrowing amount

-?????????Children.?They are counted by lenders as dependants and as such children can affect the borrowing amount for the mortgage.?This can be impacted less by including child benefit but not all lenders will take that into account depending on the length of time you’re taking the mortgage over.?School/nursery fees are also important to include and these will lower the amount you can borrow with most lenders.?The same would go for any maintenance payments

-?????????Commitments.?Getting any debts you hold correct along with the amounts is really important.?Nondisclosure in mortgage applications can cause complications in arriving at a final borrowing figure.?If you have any debts for instance a credit card or loan then be sure to know who it is with, how much you pay monthly, how much is outstanding on it and whether you intend to pay it back before the mortgage begins.?Some lenders will have a three month grace (some more, some less) after the mortgage begins to pay back any debts you’ve said you would pay back.?Don’t forget to include things that may not come out of your bank account.?These may be things that come out of your payslip: student loans, cycle to work schemes etc.

-?????????The overall term of the mortgage can give a boost to affordability in some cases.?The longer the repayment term, the more a lender may be willing to lend and vice versa

-?????????The age at application is also important and this ties in with the above.?As lenders tend to work with maximum retirement ages, an older applicant may have to take a shorter term which means higher potential mortgage payments and as such a lower borrowing amount could be agreed

-?????????Length of rate is something that can boost affordability.?Some lenders currently give enhanced affordability for those looking to take out five-year fixed rates as opposed to two-year fixed rates

-?????????Properties in the background.?Do you have another mortgage??It will count as a commitment and therefore needs to be included.?If the background property is rented out for a greater sum than the mortgage costs per month then it will likely be treated as self-financing by a lender.?This means it doesn’t impact your borrowing amount negatively.?If you have profit from land and property on at least two tax calculations then some lenders may use this profit as extra income for affordability.?Not all do

The above are just examples of what can be taken into consideration in deriving the amount a lender will potentially lend to you.?Therefore, the more things you have eating away at your income per month the less the lender will give you.?Speaking to a broker will help make it much clearer what you could potentially borrow and help answer the question: what size of mortgage will a lender give me?

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