How Do Mortgage Lenders Work Out Affordability? | Mortgage Affordability
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The affordability of a mortgage is an important part of any enquiry, to be approved for a mortgage loan, the lender will see if you have sufficient income to support the monthly mortgage payment / loan payments as well as ensuring your total outgoings are not to great.
So, How Much Of A Mortgage Can You Afford?
Each lender use there own individual formula to calculate whether you are able to afford the mortgage you are applying for or not, sometime these formulas are referred to as qualifying ratio formula because they estimate the amount of money you should spend on mortgage payments in relation to your income and other expenses.
Here at First Choice Finance we have an extensive panel of lenders and will compare your enquiry to the many different mortgage plans on offer, in some cases there are government schemes available that can help people who may find buying a house more difficult, these include the help to buy scheme and the right to buy sceme that can reduce the amount you need to borrow reducing your mortgage payments and making them more affordable.
Find A Home That Will Meet Your Family`s Needs, And Mortgage Costs You Can Live With
Any costs that extend 11 or more months into the future, such as a car loan, are termed long-term debt. The payments of these deebts is including in your outgoings that will be included in the affordability calculation. Other outgoings include food, utility bills, cost of dependents etc.
When budgeting to purchase a home and calculating if you are able to keep up with your mortgage payments, it is important to allow enough money for additional expenses such as maintenance and insurance costs, find out what other costs you may have such as utility costs and maintenance costs to help you better prepare for homeownership.
Homeowner`s insurance or property insurance is another cost you will have to consider.
For more information and a no obligation free quote please contact us and one of our mortgage advisers will be happy to discuss your needs and requirements
The difference in average house prices and typical earnings across the UK has now widened to its largest point in the last eight years.
Research published by Lloyds Bank has revealed the so-called `affordability gap` is now the worst it has been since the onset of the global economic downturn back in 2008, and is likely to continue to grow in 2016.
According to the body`s latest Home Affordability Index for 2015, the results showed that average UK house prices rose by eight per cent in the last year, while the average level of earnings growth has failed to keep up.
This means that from 2015 to 2016, the ratio of annual salary to home prices has risen from 6.2 to 6.6 times - representing a third annual year of decline in UK home purchase affordability.
Across the country, the data revealed those cities that are now the least affordable for buyers, with Oxford now officially the nation`s most expensive city to buy in.
Oxford buyers are now facing a price to earnings ratio of 10.68, while other high-cost cities in the current financial climate include Winchester at 10.54, Greater London at 10.06 and Cambridge at 9.9.
However, at the other end of the spectrum, the most affordable places to purchase this year were shown to be Londonderry in Northern Ireland at a ratio of 3.81, followed by Stirling in Scotland at 4.11 and Bradford in the Yorkshire and Humber region at 4.31.
Responding to the research and its findings, mortgage products director Andrew Mason stated that house prices have witnessed steep growth in the last three years and this has led to the current situation where buyers in some parts of the country require upwards of ten times their annual earnings in order to buy a home.
Furthermore, Mr Mason added that a distinct north-south divide continues to be witnessed in the affordability of UK housing, with areas of southern England having so far been privy to far stronger price growth than other parts of the UK since the onset of the economic recovery.
This may be good news in terms of the level of affordability that is being seen in many areas outside of the south, but unless wage growth increases to a level that matches property market increases, then potentially in some of the UK there will not be affordable homes for buyers in the very near future.
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