It’s the question on every house buyer’s lips, and it could be the key to buying your dream home. When a lender assesses how much to offer you, it’s not simply based on your income but also on your affordability.
How Will a Lender Assess Me?
The lender will ask you to fill out a fairly detailed form in which you declare all incomings. This includes your basic salary, any bonuses and even some additional incomings such as child benefit. You will also need to add your total expenditure, and this is where affordability comes in. So, for instance, someone who earns £50,000 but spends £10,000 on childcare technically has a lower affordability rating than someone who earns £45,000 but has no childcare costs. Expenditure such as credit card bills, household bills and car loans will all come into consideration.
Generally speaking, mortgages are offered at around 4.5 times your salary. However, your affordability assessment may mean you are offered less than this. They will also do a ‘stress test’, which takes into account your ability to continue paying the mortgage should your circumstances change. A young couple who are likely to start having children, for instance, or someone in a risky job market may be offered less. Furthermore, the likelihood of interest rates rising will affect everybody’s stress test results.
Make Savings Where You Can
Bringing your overall moving costs down will also help you stick to budget. Save on estate agent fees by using an online provider, or negotiate with the agent to try and cut off a small percentage – perhaps in exchange for doing your own photos or viewings. Make savings on elements such as conveyancing and surveys by looking for competitive rates. Those looking for a good-value home buyers survey Stoke on Trent should consider firms such as https://www.samconveyancing.co.uk/Homebuyers-Survey/Home-Buyers-Survey-Stoke-on-Trent, who charge below the going rate.
Many house buyers are desperate to borrow as much as they can, but it’s actually really sensible to be conservative with your borrowing. Keeping your mortgage payments lower gives you more flexibility in your life and a higher likelihood of always being able to make the payments. As well as the lender’s assessment, do your own and work out how much you can really afford in mortgage payments, before you even apply.