“Can I get a mortgage in my situation?” and “How much can I borrow?” are two of the most frequent questions we find that we are asked by First Time Buyers in Newcastle & people who are Moving Home in Newcastle.
In this article, we take a look at the latter of those two questions;
It would be nice to sit and draw out some specific guaranteed figures, but that of course can’t quite work in this setting.
Everybody has a unique case to them and this amount will usually be different depending on what your situation is.
We can however reflect upon how this may be worked out by the mortgage lender, compared to how it was worked out in the past.
In 2014, following on from the mortgage and property markets recovering, the regulator launched the Mortgage Market Review (MMR).
This was a set of brand new guidelines that lenders had to follow, factoring in things like household spending habits.
Prior to 2014, two applicants who were earning the same income could borrow more or less the same amount, no matter what they were each spending.
Once it had changed, it was more about looking in-depth at what you were spending each month and why.
As an example of this, you could be earning the same amount, but have additional costs like childcare costs, which your counterpart may not.
This means they are likely to have access to more than you would from most lenders. There is still a “cap” to prevent the majority of mortgage lenders from going past so much of your annual income.
We regularly find ourselves being surprised by the variations between mortgage lenders. For example, some lenders have been known to penalise low earners, whilst others see pension contributions as a fixed outgoing.
Both of these factors can have an impact on the amount you’re able to borrow for your mortgage.
Of course, whilst it may be more streamlined nowadays, how did we get this far? Why is it the way it is?
Way back when, in the 80s and 90s, there was not a whole lot of technological intervention in the way the mortgage process worked.
How you would go about it, is you would make an appointment with your Building Society Manager who would then encourage you to a bank and save with them if you already weren’t doing so.
This would allow them to gauge if you were creditworthy. If you were, they would give you something akin to an Agreement in Principle, followed by mortgage advice and an outline of how much you could borrow.
You could argue this was a highly personalised, common-sense approach. The issue, however, was the inconsistent decision-making as the Building Society Manager would interpret the guidelines and the criteria in their own way.
Looking to get rid of the inconsistencies and to cut the costs involved, lenders moved to automated affordability calculations. This resulted in multiplier caps being applied so that managers could no longer lend more than a specific amount.
As the 2000s continued onwards, mortgage lenders were becoming more generous in how much they would lend an applicant. Some even offer self-certified mortgages, which required no background checks at all.
In 2008, as we likely all remember, the market crashed. This eventually led to a difficult couple of years for those trying to buy a home. Mortgage lenders tightened up on lending and became a lot more cautious in their lending habits.
This leads us back to the aforementioned 2014 MMR and where we thankfully are today.
If you are looking to maximise your borrowing capacity to buy your home, you will benefit from taking on the services of an experienced mortgage broker in Newcastle.
Our team of expert mortgage advisors in Newcastle will be able to analyse your situation and work out your finances to ensure that the repayments feel comfortable to you.
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