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Mortgage Borrowing Limits
Mortgage borrowing limits for mortgages are determined by several factors in the UK. This page will give you information about lenders
income calculations including income multiples and proof of income. Your status and the type and value of the property you are looking
to buy will be considered by any lender as well as your salary earnings.
For mortgage borrowing limits, borrowers earnings are assessed, meaning for example that you will normally have to supply some form of
proof of your income, and then an
income multiple is applied to give you the maximum amount that you can borrow. Usually your full basic salary will be multiplied,
however often any bonuses (especially if they are guaranteed or regular) can also be included at the lender's discretion. Before
the income multiple is applied a lender can deduct the cost of any repayments to creditors (any finance arrangements you might have).
Income calculations can be as follows:-
- 3 x 1st applicants salary plus 1 x 2nd applicants salary
- 2.5 x both applicants salaries combined
- please note that many lenders will only allow 2 applicants and if there are more than two applicants you may find you get awarded a different income multiple
- some lenders will allow higher multiples, e.g. 4 x 1st income plus 1 x second income or 2.75 x joint income
- you may find some lenders will even lend to you on affordability rather than income multiples
Worried about Proof of Income?
If mortgage borrowing limits are based on income, what happens if you cannot provide proof of income? Many lenders now offer a self
certification option, especially for self employed people who find it hard to provide proof of income
because of the nature of being self employed. So don't worry about this. Feel free to read the "self employed" page that you can click
on on the left. Once you are happy, please click on "apply now" to see how we could help you.
Your Personal Affordability
It is extremely important that what ever your mortgage borrowing limit is on paper, you can definately afford to cover the repayments for
the mortgage loan. This type of loan is not a short term loan, it is a long term commitment (often 25 years) and you must be able to pay it
every month for that time. Bear in mind when chosing your mortgage that rates can go up as well as down. If you overstretch yourself
now whilst the rates are low, you may find you have difficulty if the rates go up.
This is what happened in the 1980's when people
bought properties when the houses were expensive, they overstretched their income multiples for their mortgage borrowing limits and found that when the rates went up
to around 15% they had problems meeting the repayments. They had the double problem of not being able to sell their properties because
the house values had dropped (this is what is referred to as negative equity).
As long as you are sensible when looking at your mortgage borrowing limits for the purchase of a property or a remortgage, whether you are a home buyer,
a remortgager, a 1st (first) time buyer, a council right to buy tenant or a buy to let landlord, you stand yourself in better stead
if unfortunate eventualities arise rather than if you are gunhoe now. If you are wondering about house prices or problems with repayments, please
refer to the pages on the left called "house prices" and "mortgage protection". Please use the "apply now" button above to submit your enquiry
for a free no obligation online mortgage loan quote.
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