sti-04!!

I had a discussion with someone in the pub last night about mortgage borrowing.

I seem to be under the impression the maximum that the banks will give is 3 x annual salary for a single applicant, for a joint its 3.5 x annual salaries.

He says that you can get upto 7 times Now that seems a bit extreme

Anybody any ideas ??

Richard_P

Some will lend upto 5x

Most will do 3.5x single salary or maybe 4x.

Or you could do celf sert and get a larger amount.

Certainly from my calculations 4x would be right at the limit of my affordability in terms of monthly outgoings and thats without even a car loan so anything more would be a big undertaking!

Ritch96

You've got it the wrong way round. It was "traditionally" 3.5 x single income or 3 times joint. However, these days it is indeed possible to get much more from lenders.

Ritchie.

MikeCardiff

iTrader: (2)

It depends a lot now on how good the lender is - a good lender wont lend more than 4x as this is about the most people can afford to repay.

The ones who lend 6x and do ridiculous self cert ( basically 'how much do you want to pretend you earn sir ?' ) arent lending responsibly and are more interested in just getting their commission.

sti-04!!

Self cert ??

shaunywrx

You go to your mortgage broker, tell him you earn £200K a year, and they lend you £600k, it's about as simple as that really, as long as you can make the repayments they don't care.

Petem95

Self-cert (also known as lie-to-buy) is for people like contractors who may not be able to provide a wad of payslips to prove income, so they tell the bank their income and the bank dont check up.

A lot of mortgages taken out over the last couple of years have been self cert. You could go and say you earn 100k and get a 350k mortgage as a result...

Banks (unsurprisingly) are writing off ever larger amounts of bad debt, so I wouldnt be surprised to see mortgage multiples of over the usual 3.5x becoming less common.

sti-04!!

When i got my mortgage for the house i have at the moment, they required proof of income ??

Pedro_79

My mortgage is 5 x salary, and I didn't have to prove income.

It can, however, be a bit of a struggle - but then, if I wasn't able to borrow that amount then I'd be paying someone elses mortgage in rent.


The fact is, I'm still able to own a classic scoob and pay all the bills. It's not as hard as some people make out.

ScoobyTal

If you get more than you can afford the only loser will be you the bank aint bothered they will get there money back plus interest what ever happens

You aint fooling anyone except yourself if you get a self cert all it means is you have a bigger loan

Stick to 3.5X your salary

Pedro_79

I take exception to people (especially banks) trying to tell me what I can or cannot afford.

The problem is that most people don't have the brains to be creative with the money that they do have, and that's when the sh*t hits the fan.

sti-04!!

aaaaaaahhhh

It all makes sense.

Someone i know has just purchased a house at 180k, his g/f has bad credit & he is on 30k per annum. though the two of them pull in roughly 45k. We were gossiping last night as too how he could get the mortgage.

Just being my usual nosey self

Richard_P

Joint 45k earnings, some banks would lend 180k on that. Or of course as mentioned go self cert.

sti-04!!

Just so i can get my head around this

If he went self cert, would they still do employment checks ??

MikeCardiff

iTrader: (2)

Proper places should where possible - it is quite easy to check what someone earns and what they spend by looking at a few months bank statements - the problem is shady brokers who are only interested in pocketing the comission, and dont care if the borrower can actually afford it.

I did hear of some who would ask the borrower 'how much do you need to borrow ?' when told, they would say 'right, we'll fill in that you earn X amount then, and that'll be OK'.

High multiple borrowing can work, but only if the borrower either has a very cheap lifestlye ( although, if they do then they should be able to save a bigger deposit and not need to borrow as much ), or they are very disciplined with their money.

Generally though the standard 3/3.5 rate was worked out as being a rate that was affordable for most people to pay back comfortably.

The main problem with borrowing so much is that while you may be able to afford it this year, if the interest rate goes up even a small amount then you can quickly get in trouble.

Pedro_79

They 'ask' you your occupation and salary, but they don't require any proof.

sti-04!!

So no proof at all ?? All he would have required was a good credit history ?

Pedro_79

Basically, yes.

hades

The "affordability" of a given multiplier stuff is very dependent on your total earnings, wealth etc. If you are earning say £50k / year, everything else is already fully paid off (no credit cards, etc), a 4* your salary mortgage at say £1300ish / month wouldn't be a stretch from a ~£3k/month take home.

If however, you're earning £20k/year, with a car loan and other things, then going for a 4*salary mortgage at say £500ish / month would probably not leave you enough to live on.

Total income is very relevant as if you're paying say 40% of your take home salary on the mortgage, and if your take home was only £1k/month, leaving £600/month for bills, council tax, food, running a car etc, it'd be a struggle. If you're on 3 times that amount, most people are quite happy to cope with £1800/month for food etc!

Therefore, a lot of lenders will look at the full financial picture rather than just income. I'm not having anyone flinching at a 4* salary mortgage, but then again I have no other debts, a decent wad of savings (will offset against the mortgage as it happens), a good credit rating, no dependants and therefore no problem with affordability etc.

hades

Also, you'll tend to notice that a limited number of lenders do self-cert, and the deals are often not as good as you'd get on "conventional" mortgages.

davyboy

Correct.

I think it says a lot about someone if Nationwide will not offer you a mortgage!

Vegescoob

Don't forget houses only ever go up in value.
In, oh 15/20 years, all house owners will be £millionaires.
So easy isn't it.

Jay m A

iTrader: (2)

Usually the banks don't ask questions about affordability when the deposit is 15-20%

Can you get 95% LTV self certs?

SlimJ_2005

I think it's high time the mortgage lenders stopped lending so much money, it's just fuelling the market.

Soon as they stop the big lending, the prices will soon fall...

SimonGawthorpe

Its already happening!!

Only another 15% to go and then I might even buy one!

Si

fast bloke

Some lenders will lend higher multiples based on affordability. Ulster Bank and Alliance and Leicester are probably the best two. They take your proposed mortgage and all your outgoings. Then based on the number of applicants and number of dependants they will set a monthly amount that they feel you reasonable need to live on. A 45 year old couple with no kids on combined income of 50k and no other debt will be able to afford more than a 30 year old couple on 50k with 9 kids. Seems more sensible than a standard 3.5 times or 4 times

davyboy

I guess you'll be waiting for a while yet then

Goochie

Abbey will lend 4x main income + 1x second income.

fast bloke

Depends on your income and LTV. They will go up to 4.2 joint for incomes over 35k and LTV under 75%

Fat Boy

Before any of you get too tempted to get yourself into trouble with a big self cert mortgage - you need to understand that although you don't need to provide the usual proof of income, the vast majority of self cert lenders will only lend around 75% of the value ( as determined by their surveyor) of the house so you would need to find a chunky deposit.

My advice, being an old fart and having lived through several cycles of the mortgage market, is not to go beyond 3 -3.5 times a single salary as all these daft multiples are based upon interest rates remaining low. It wouldn't need much of an upward shift in mortage rates, say 2%, to start having a big effect on affordability for a lot of people.

The mortgage lenders as usual are chasing market share with high multiples and high LTV ratios and the turkeys WILL come home to roost eventually - they always do... repossessions and bad debts are beginning to rise again admittedly from very low levels.

I remember only too well mortage rates of double figures and even up to 17% at one brief mad point.