When people approach us for Mortgage Advice in Hull, one of the first questions that we get asked, particularly by First Time Buyers in Hull, is “How much can I borrow for a mortgage?
Let’s look at the background of affordability assessments and how they apply post-2014.
Before the days of credit scoring, mortgages were manually assessed by your local building society manager. Lenders moved towards more uniform income assessments to provide a consistent approach in the 1990s.
Maximum lending “caps” were introduced so that customers couldn’t borrow more than three to four times their annual income.
Near the time of the credit crunch in the 2000s, these income multipliers kept becoming more and more generous. Of course, some lenders allowed their customers to “self-certify” their incomes with no background checks such as payslips.
This all went very wrong and it was a struggle to get onto the property ladder from 2008-2010. This is because lenders battened down the hatches and created an extremely cautious (over-corrected) lending environment.
Whether you were directly approaching a lender or going through the broker route and getting Mortgage Advice in Hull, both outcomes would be the same.
The Mortgage Market Review (MMR) was introduced once the market had finally recovered from the effects of the credit crunch. This brought a new set of guidelines for lenders to adhere to. The old income multiplier method was scrapped and replaced with new, more sophisticated affordability calculators.
These new calculators provided a closer look into an applicant’s spending habits and net disposable income. This meant that the lender could have an in-depth look into your bank statements to ensure unaffordable mortgages were not granted as they were before the Mortgage Market Review.
There is still a “lending cap” in place at about 4.75 times your annual income, but your expenditures are also analysed. For example, Lenders seem to penalise low-earners and even things like gambling can sometimes affect your chances of being lent the money. When it comes to your bank statements, lenders will look at a lot of different things, so during the months leading up to your application, be wary of what your expenditures are.
Some take pension contributions as a fixed outgoing so would often lend, say a public sector worker with a big pension deduction less than a private sector and so on.
If you are looking to maximise your borrowing capacity to help aid your application for that dream home, then we recommend speaking to a Mortgage Broker in Hull, like us. A Mortgage Advisor in Hull will research the market on your behalf and try to find you a lender that will lend you the amount that you need as well as a deal that is best suited you personal and financial situation.
Getting Mortgage Advice in Hull before taking out a mortgage could help you understand the whole process a lot better. If you come to a broker like us, you will have your own Mortgage Advisor in Hull who will explain everything to you and help you work out your finances to ensure that the repayments feel comfortable to you.