How Much Can I Borrow For Mortgage UK – Mortgage Calculator Credit Score Deposit

How Much Can I Borrow For A Mortgage UK – Mortgage Affordability Calculator Credit Score Deposit. In this video, we look at all the factors that lender look at in determining how much you can borrow when getting a mortgage. Specifically, how they calculate affordability and we discuss the use of affordability calculators on lenders web sites.

Hey there thanks for joining me my name is michael i’m a qualified mortgage broker today’s video is going to be all about that magic term affordability this is how lenders decide how much they are prepared to lend you based on your situation it’s a term you’ve probably heard banded about lots of times but you probably don’t know exactly what it means or are unsure

So we’re going to look at how it’s calculated all the factors that determine affordability and then how you can check it yourself if you’ve seen the previous video where i went through the three factors that determine whether a lender will lend to you and how much they will lend you will remember that the first one is your credit score so this simply dictates

Whether they will or won’t lend and then based on what they see in your credit file they will give you give you a yes or no answer and then they will also give you an indication of the second factor of the minimum deposit you will be required to put down with that lender the level of deposit is the second area that dictates how much you can borrow expressed as

A percentage of the property you’re looking to buy or the value if it’s a remortgage and finally the third area which we’re going to look at in depth now is that magic term affordability so let’s get on with it so several years ago there was some big changes in the mortgage market one of the key areas was lenders now required to check that you can afford that

Mortgage not just now but also in the future so they’ll check that you can afford it on today’s rates but they will also do something called stress testing where they will make sure that if rates rise a certain amount in the future you can still maintain your payments and that’s one of the key reasons why you’ll find that you can afford to rent for a lot more if

You go through estate agents and things like that whereas mortgages it’s about your affordability as things are now but also stress tested in case rates rise in the future or your situation changes so the fca put some strict guidance in place that all the lenders had to adhere to when they were checking people’s affordability so each lender then went away came up

With their own calculations that fit within this criteria and it’s resulted in all these different lenders having affordability calculators where they work out the amount they will lend to you but there is a big difference between them and not only do a lot of them ask different questions there is also a big difference in the results these calculations give you so

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You can have one lender that might give you a hundred thousand pound loan one lender might say they’ll give you a three hundred thousand pound loan for example so there is a big difference okay so what information do lenders require well again it’s different from lender to lender and there is a big long list some lenders have quite basic affordability calculators

To some that are incredibly thorough and complicated what i’m going to go through is some of the more common bits of information that lenders ask so it’s not going to be an exhaustive list and i won’t be covering everything but the main key points that are common throughout each lender will be covered so the main areas are income any committed expenditure the loan

To value the term that you’re wanting to take the mortgage over and the number of dependents you have okay before i go on to talk specifically about those areas i’ve just mentioned one thing i do want to say is these affordability calculators are computer-generated algorithms programs so like anything ai or computer related the information that you get out at the

Other end is only as good as the information you put in it at the front end so that’s where it’s key to make sure what you are entered is correct not only that it’s correct but it’s calculated in the way that that particular lender calculates it and that is where the skill comes in of a good mortgage broker knowing the criteria and policies that each lender uses

To calculate the various different factors okay so the first factor is income so you want to key in on the calculator all income that is relevant to you that you want to use to support your application you need to know what income types are acceptable to that lender they don’t all accept everything so if you’re employed for example will they accept bonuses will

They accept over time do they take zero hour contracts do they take commission how many months commission do you need to evidence it etc etc benefit income what type of benefits are acceptable there are lots and lots of questions to ask yourself in regards to income to find out if that lender one accepts it and two how they calculate it self-employed so what

Question we get asked regularly will lenders accept self-employed well yeah all lenders will accept self-employed income the question is how do they calculate it and how many years evidence does that lender require do they need one year do they need two years do they need three years do they take the latest years figures but they want three years do they take

An average over the three years did they take an average over two years do they want two years did and do they use the latest figure these are all different scenarios employed by different lenders so the three key things you need to know when you’re talking about income is one is that type accepted two how does that lender calculate it and three what evidence do

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They require to prove that income and that’s pretty much across the board whatever type it is whether it’s income employed income self-employed income benefit income pension income investment income whatever it is they’re the questions you need to be asking okay the next factor that crops up on every affordability calculator is your committed expenditure now this

One is where the big difference in what lenders ask comes in and how they calculate committed expenditure what is committed expenditure for each lender some will have a list as long as your arm some might ask 89 questions on it some basic rules of thumb are anything on your credit report so any financial commitment you have will be pretty much on there for every

Lender so the key point that affects you borrowing is the monthly repayment credit cards they go in there and it’s not your minimum payment a general rule of thumb most lenders tend to go off three percent of the balance for your monthly payment so if you owe a thousand pound your monthly payment 30 pound a month so with finance agreements another thing you need

To be aware of is if it is being cleared prior to the mortgage starting you need to know whether or not that lender will discount it some lenders will say yeah if it’s being paid off before the mortgage starts we will ignore it others won’t if it’s on your credit file at the time of application they will account for it even if you can say an evidence that it’s

Being paid off so other committed expenditure now this can be a very long list so what i will do is i’ll put a list upon screen of all the ones i can think of off the top of my head i’m not going to go and check every lender’s affordability calculator and get a complete list because that will take too long so i’m going to put all the common ones on screen so you

Can see what sort of things will affect your mortgage applications but they won’t all apply to every lender so what i want you to do based on this list is leave me some comments and some questions below asking me if there’s any not on the list and you want them clarified put a comment in if there’s anything more information you want about any on the list leave

The comment below if there’s just too much to go through in one video but i will answer your comments with any questions you’ve got so again with all these committed expenditure key thing is the monthly repayment okay the next factor that’s relevant is the term of the mortgage so how many years you’re going to take it over and one factor that plays a big part of

This is your age all lenders will have maximum ages for various different applications so they’ll they will have a retirement age where they’ll only accept employed income or self-employed income up until that point they’ll have a maximum wage to which they’ll lend full stop but if that goes beyond the retirement age then you have to stop evidencing retirement

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Income etc so the term and your age plays a big part in affordability the reason being if if you’re a 25 year old and you want to take it over 35 years well that’s gonna that’s not going to be a problem so you can spread it out over longer which will result in you being able to have a larger loan and say someone who is 60 and will be retiring at 70. they’ve only

Got 10 years so that needs to be paid off within a 10-year period which is going to result in a higher monthly payment to get it paid off which will mean that they will not lend as much as someone who is 25 on the site with the same income and outgoings last area i’m going to talk about now is is the number of dependents so that can be child dependence or adult

Dependence the more you have the less you’ll be able to borrow as a general rule of thumb something you’ve got to be wary of here is you want to avoid it being double counted so what i mean by that is if it’s a joint application and you’ve got two kids don’t put in that you’ve both got two kids because it will double count it you only need to put it in against

One person and the other way sometimes you can get double counted is if when you’ve got children but they might not live with you full time but you might consider them as financially dependent but you’re also making either maintenance payments or csa payments if if you are and you put you’ve got two children but then you’ve got a 400 pound a month csa payment

Going out it’s it’s getting double counted and affecting you twice there so in that scenario you’d leave say you’ve got no dependents but you put in that you’ve got a 400 pound a month csa payment and then any any costs associated with your dependent children dependent adults these will also quite often have to be put in the previous section we talked about on

Committed expenditure so any child care fees nursery fees private school fees anything that is an expenditure for the children that is regular monthly may need to go on as a committed expenditure guys that has been a pretty quick walkthrough of what is a really complicated subject affordability calculators what i’m going to do in the next video is i’m going to

Do some walkthroughs on screen of a few different lenders going through how you put that information in and how it then triggers the results so if you click up here it’ll take you to that video and i think you’ll find it useful my name is michael thanks for watching please consider subscribing and i’ll see you soon

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How Much Can I Borrow For Mortgage UK – Mortgage Calculator Credit Score Deposit By PFS Mortgages