When customers get in touch with us for Mortgage Advice in Lincoln, more often than not, the first thing that we get asked, especially when we are speaking with First Time Buyers in Lincoln, is “How much can I borrow for a mortgage?”
Let’s reflect upon the background of affordability assessments and how they apply to the mortgage world post-2014.
Prior to the methods of modern credit scoring, your mortgage would’ve been manually assessed by your local building society manager. Lenders gradually moved towards more uniformed methods of income assessment, in order to provide a consistent approach as we headed into the 1990s.
Maximum lending “caps” were introduced to prevent customers from borrowing any more than three to four times their annual income. As we grew closer and closer to the infamous credit crunch in the mid-to-late 2000s, these income multipliers were relaxed, with lenders being more generous.
A handful of those mortgage lenders were allowing their customers to “self-certify” their incomes without subjecting them to any background checks, such as an analysis of their payslips. This, as you may be aware, caused the market to crash and getting onto the property ladder from 2008-2010 was quite difficult.
Lenders very quickly battened down the hatches and created a massively careful (arguably over-corrected) lending environment. No matter if you were directly approaching a lender or opting to speak with a mortgage broker in Lincoln, the outcomes would mostly always be the same.
The Mortgage Market Review (MMR) was introduced off the back of the market recovering after the credit crunch. From here, lenders were given a new set of guidelines that they had to follow. The income multiplier methods of yesteryear were phased out and replaced with new, more complicated affordability calculators.
These new calculators gave the lenders a more detailed analysis of an applicant’s spending habits and net disposable income. What this meant, was that the lender could take a deeper look into your bank statements to make sure that unaffordable mortgages were not given out to customers as they had been in the past.
There is still a “lending cap” in place and it is roughly about 4.75 times your annual income, but your expenditures will also be looked at. Something that is worth noting, is that lenders seem to penalise low-earners and even things like gambling can have an adverse affect on your chances of being able to borrow.
When it comes to your bank statements, mortgage lenders will keep an eye on various factors, so during the months leading up to your application, be careful as to what exactly your expenditures are. Occasionally lenders take pension contributions as a fixed outgoing so would often lend to, for example a public sector worker with a big pension deduction less than a private sector, and things of a similar ilk.
If you are looking to maximise your borrowing capacity in order to help your mortgage application, then we believe you’ll benefit from speaking to a Mortgage Broker in Lincoln.
You’ll receive a free initial appointment, where a Mortgage Advisor in Lincoln will take some information, before heading off to research the market on your behalf, working to find a deal that best suits your needs and circumstances.
Getting Mortgage Advice in Lincoln before taking out a mortgage could be crucial in helping you understand the mortgage process better. By speaking to a mortgage broker like us, you will have your own Mortgage Advisor in Lincoln who will explain how everything works and support you from the beginning, right through to the end of your mortgage journey.