A Guide to Affordability

Mortgage lenders have traditionally used income multiples to decide how much you could potentially borrow, this calculation can sometimes produce an affordability ‘gap’ because house prices have risen beyond these calculations.

However, in more recent times, many have based their maximum borrowing based on ‘ability to pay’, which sometimes allows applicants to borrow a little more.  This will inevitably be subject to circumstances such as your credit file, whether you have had bad credit in the past and other elements such as If you have a family and other commitments.

The type of mortgage product could also affect this decision as well, such as a fixed rate mortgage, because the monthly repayments stay the same for a period of time, which is easier for borrowers to manage and budget for.

Affordability can also be down to the property you are looking to purchase as well, if you are looking to refurbish a property it would be never advisable to borrow to your maximum affordability limit as this would hamper any desire for making the improvements you wish to make.

The more money you borrow from your mortgage lender, the higher your credit score typically needs to be.   There are still plenty of options for First Time Buyers whose affordability wont quite stretch to their desired lending amount due to credit issues or a low credit score.

Here are some of the most commonly-used First Time Buyer methods.

Family Deposit Support

The bigger your deposit, the better the mortgage you can access. For this reason, a high percentage of first-time buyers are often gifted money by family members to put towards their deposit. This could not only get you onto the housing ladder quicker and there is varying options from straight forward gift to placing the deposit in a special savings account with the bank or securing it on the family home if this is mortgage free.

The Help To Buy mortgage deposit scheme.

Under this scheme, you can borrow up to 20% of your property’s value from the government to add to your 5% mortgage deposit. There are several terms determining your eligibility for this scheme, so it’s important to talk to us to understand these before applying.

Lifetime ISAs.

Help to Buy ISA’s were a way of saving to get the deposit to buy your first home. You could earn interest on the money you deposited into the account and if you used the ISA for the deposit on a house the government would boost your savings by 25% contributing up to a maximum of £3,000 towards it. The most comparable product now available is the Lifetime ISA, and further details can be found at https://www.gov.uk/lifetime-isa

Clever Mortgages have experience and expertise in complex and difficult cases and can find the best lenders for your circumstances. We can also advise you on your affordability while you are planning to apply for a mortgage and buy your first home.

Contact us today on 0800 197 0504 or click below for more details.