Affordability Calculators

Historically, you could get a good gauge of what someone could borrow on a mortgage based on a multiple of their sole or joint salaries; whilst this could vary from lender to lender it wasn’t by much.

That all changed in April 2014 with the introduction of the mortgage market review which moved banks and building societies towards ‘affordability based lending’. Some had already been doing this for a few years and the idea is very sensible. It’s assessing the money you bring home each month, taking out all your regular bills and outgoings that will continue after the mortgage starts; and then working out what is left over to pay for the monthly mortgage, now and in the future, whilst allowing you to maintain an acceptable standard of living.

The majority of mortgage lenders and many aggregate sites, such as Money Supermarket etc, have online calculators where you can input this information to give yourself a maximum amount you could borrow. This provides a simple and quick opportunity to ascertain your mortgage capacity without going through a full process with a bank, building society or broker/adviser.

The issue is that every lender uses a different formula and not all take into account all of your income, so it can be a lottery as to whether the borrowing figure at the bottom of the page is at all accurate.

If you are employed, you need to have at least one of your payslips in front of you – more if your pay differs from month to month or even week to week. If you are self-employed, you will need at least your last two years’ tax returns in front of you and at least one full month’s bank statement showing all regular outgoings and any other income, such as state benefits or investment income. Remember that different lenders may take all, some or none of overtime, bonus, commission, benefits or other income into account; and for the self-employed they may work from an average of two or three years’ declared income or the latest year.

For a considered and consistent approach, sound advice is key. Here at Euxton Mortgage Market, we are always happy to discuss your next move.

May 2019