How Much Could I Borrow for a Mortgage?

How Much Could I Borrow for a Mortgage?

We are often asked two questions. "Will I be able to get a mortgage?" together with "How much can I borrow?" The second option will be the focus of this article.

In the 1980s and 1990s, there was minimal computer interference in the application process for a mortgage. You would schedule an interview with the local building society manager, who would then conduct the interview.

The majority of the time, they will advise you to bank with them until you establish credit worthiness. After this time, the management would provide you with the equivalent of a letter of intent, containing information on how much they were willing to give you.

Some individuals see this as a very individual and common-sense procedure. However, it sometimes resulted in uneven decision-making since the manager was left to interpret the loan guidelines. You may have contacted the same building society in a different city or town and received a different response.

Lenders use computerized affordability estimates to make the process more equitable and save on expenses. They imposed "caps" so that they would not lend you more than, say, three or four times your annual family income.

As the decade of the 2000s advanced, lenders increased the amount they were willing to offer. Some lenders have even started to provide mortgages where no background checks are conducted.

In 2008, the market collapsed. In the subsequent couple of years, lenders tightened their belts and established a very cautious lending climate. This made it more difficult for many individuals to climb the property ladder.

Modern Approach

In 2014, after the market's recovery, the regulator initiated the Mortgage Market Review (MMR). This was a new set of standards that required lenders to abandon the outdated income multipliers that did not account for household expenses.

Prior to 2014, two applicants with identical incomes could borrow almost the same amount. This was regardless of their monthly expenditures. Then, though, new affordability models were introduced, which investigated how applicants handled their monthly finances.

There is still a "cap," with the majority of lenders not exceeding 4.75 times your yearly salary. Prior to selecting how much to lend, companies now evaluate your spending patterns. For example, if you have significant childcare costs, multiple credit obligations, and school debt, you will be offered less than your friend who does not have these costs.

At ManchesterMoneyMan.com, we are often shocked by the vast differences among lenders. Some lenders seem to punish low-income borrowers (perhaps they are not looking for that type of applicant). Others see pension payments as a fixed expense, so they often lend less to those who make larger pension contributions.

It is really a case-by-case basis, and if you want to maximize your borrowing capacity in order to purchase the property you need, you will need a local mortgage broker on your side. There is someone who can do market research on your behalf to see whether anybody will lend you the required amount given your specific circumstances.

If you're pondering, "How Much Can I Borrow?" To ensure that your mortgage payments are affordable, you should speak with a financial advisor before applying for a mortgage.

Summary

In the 1980s and 1990s, there was minimal computer interference in the application process for a mortgage. Today, lenders use computerized affordability estimates to make the process more equitable and save on expenses. Some lenders have even started to provide mortgages where no background checks are conducted. In 2014, after the market's recovery, the regulator initiated the Mortgage Market Review (MMR). This was a new set of standards that required lenders to abandon the outdated income multipliers that did not account for household expenses.

Some lenders seem to punish low-income borrowers (perhaps they are not looking for that type of applicant). Others see pension payments as a fixed expense, so they often lend less to those who make larger pension contributions. At ManchesterMoneyMan.com, we are regularly shocked by the vast differences among lenders.