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Independent mortgage advisers
MORTGAGEadviserUK
Plum Park Estate, Paulerspury, Northants, NN12 6LQ
Mortgage Adviser UK Ltd - Reg office: MAUK House Church St Pattishall Northants NN12 8NB. Registered in England - Company No. 03789993 - Consumer Credit license No. 523133
Mortgage Adviser UK Ltd is an Appointed Representative of Julian Harris Mortgages Ltd, authorised and regulated by the Financial Services Authority No. 304155
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Think carefully before securing other debts against your home. Buy to let (pure) and commercial mortgages are not regulated by the FSA.
Other
© 2011 MAUK
How much you can borrow depends on how much you can afford.
Lenders will check this, but we can too.
Lenders have in the past offered to lend an amount based on earnings. Recently it has become more common for lenders to make an affordability assessment when calculating how much they will lend you.
What can you afford?
It's important to give us as much detail as you can about your earnings and outgoings so that you are offered a mortgage you can afford. You also need to remember to budget for the one-off costs of buying a property such as administration and solicitor fees and Stamp Duty.
Lenders should lend responsibly. This means that they should consider whether you can keep up the mortgage repayments now and throughout the term of the mortgage; for example after an initial discount period ends. They should base this on things like your income, expenditure and other circumstances.
Mortgage lenders have in the past offered to lend a sum based on a multiple of your salary (before tax).
If you have other money coming in, such as bonuses, overtime or commission, lenders may take account of only half of this because it is not guaranteed income.
Recently it has become more common for lenders to make an affordability assessment when calculating how much they are prepared to lend you. Each lender will have its own method, but generally they will all try to calculate your disposable income, taking account of:
your total income;
any credit commitment such as loans and credit cards; and
household bills and living expenses.
Keep borrowing comfortable
Work out your budget using the FSA Budget Planner to see how much money you’ve got coming in and going out and how much money you’ve got to spare.
Then you can also use the FSA Mortgage Calculator to see how much you will have to pay back each month at different rates on the amount you want to borrow. You can also put in rate increases to see how much your monthly repayments would go up if, for example, your mortgage interest rate increased by 1%.
Ensure all information you give on your application form is accurate and that you do not apply for a buy-to-let mortgage for your own home. Otherwise you will be committing fraud and could get a criminal record. You could also end up with a loan you cannot afford and possibly lose your home. And if you have a complaint later, complaints and compensation schemes will consider whether the information you’ve given on the application form is correct when deciding the outcome of your case.
How much can you afford?
How much you can afford may change over time. Find out how to protect yourself against changes in circumstances and what you can do if things change.
Four main things affect what your monthly mortgage repayment will be. These are:
How Much you borrow
How long for
The Type of Mortgage
How much you borrow
How long you borrow it for
And the interest rate deal you choose.
All these factors can vary, so use the link to the FSA Click here for link to a mortgage calculator to work out what your repayments might be. Simply enter the information it asks, and see what a particular mortgage will cost you each month.
I can afford it now, but what if...?
You may be able to afford the repayments now, but think about what could happen if your (or your partner’s) income fell or if interest rates increased.
How your income could fall
Your income could fall if you or your partner:
lost your job(s), or had to take a drop in income;
stopped work to have a child or to look after a dependant; or
became ill and could not work.
How your mortgage payments could go up
Interest rate increases
Although setting interest rates are a commercial decision
for firms, mortgage interest rates are related to the interest rate set by the Bank
of England. It is at an historically low level, but do not assume it will stay like
this. A rise in the rate is likely to affect you, unless you have a fixed rate deal
for the full mortgage term. If your interest rate deal is a standard variable rate,
your lender may change the interest rate at their discretion – see Mortgage Types.
Special interest-rate deals ending
Often special rates are for a set period only,
so when this ends your payment will change – it could be much higher.
Protect yourself against future changes
Use the about this mortgage document which we will give you to see whether you can afford your mortgage in the future and if rates rise.
Use mortgage calculator and enter interest rates that are 1% or 2% higher than they are now to help you work out what your mortgage payments will be if interest rates rise.
Avoid taking the maximum mortgage on offer unless you are sure you can afford it.
Work out how much you would need if you lost your job.
Build up your emergency fund .
Find out what your employer provides if you become ill. By law, an employer must pay most employees statutory sick pay for up to 28 weeks but this will probably be a lot less than full earnings.
There are insurance products available to help protect your income or mortgage repayments if something goes wrong, and you may be offered these when you take out a mortgage. You should consider them but be aware that there are restrictions on when and how much they will pay out – see www.lifeinsurance-uk.com
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Example annual income |
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£10,000 |
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Credit Rating |
Good Credit |
Bad Credit |
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Nearly all Lenders |
£30,000 |
£27,500 |
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Most lenders |
£35,000 |
£30,000 |
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Some Lenders may |
£50,000 |
£32,500 |
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Example joint income |
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£50,000 |
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Credit Rating |
Good Credit |
Bad Credit |
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Nearly all Lenders |
£150,000 |
£137,500 |
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Most lenders |
£175,000 |
£150,000 |
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Some Lenders may |
£250,000 |
£162,500 |