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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Is my deposit enough?
I am saving for a deposit and have around £30,000 saved which I believe would amount to a 10% deposit on what I want to buy.
I heard a discussion recently on the radio saying a 10% deposit wouldn’t be enough and it was unrealistic to think someone could get a mortgage with this. Should I save up more? My salary is currently £37k per year. Thanks for your advice.
Answer
There certainly are 90% mortgages available, so you having a 10% deposit is not an issue per se. However, lenders will generally cap the amount you can borrow at around 4.5 to five times your annual income which would mean, at best, a maximum mortgage of £185k.
You may need to consider lower-value properties or perhaps one of the available schemes, such as shared ownership.
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Question
Moving house – can I afford the mortgage?
My wife and I have just welcomed our fourth child into our family and we have realised it’s time we moved from our three bed house as it’s not big enough. We are not sure, however, if we can move because my wife isn’t working so we won’t have her salary to add into the mix this time.
The numbers are as follows: We bought our house in 2012 for £230,000 and it’s now valued at £350,000. We would like to buy something which is around £500,000 and I earn £42,000 a year. Can we get a mortgage for this amount? Or are we punching above our financial weight?
Answer
Well, congratulations! You guys must be shattered! Lenders will generally go to a maximum of 5x annual income, so it looks like the numbers are going to be short for you. However, lenders can also include within your income child benefit and working family tax credit which may help bolster the numbers.
I would encourage you to speak to a mortgage broker who will be able to run through the art of the possible.
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Question
Will the cost-of-living crisis impact my remortgage?
It’s time to remortgage in May as we are coming to the end of our two-year deal. My partner and I are both NHS workers so we were fortunate enough to remain in employment during the pandemic but we have started, recently, to struggle with living costs.
Everything seems to be getting more expensive and therefore our outgoings are higher than they were when we took out the mortgage. With National Insurance and our energy bills going up in April I am worried our finances will not look good when we come to refinance. Would we be better off sticking with our lender’s bank rate?
Answer
Inflation was at 5.5% in January and is predicted to peak at 7%. So yes, the cost of living has increased, and people are really starting to feel this in their pockets.
When lenders are looking at affordability to underwrite a mortgage, they use Office for National Statistics (ONS) data to determine how much they feel would be a fair level of the costs your household would be incurring.
As the ONS data has shown an increase in costs, the figure lenders use here has increased which, for some lenders has meant a very slight tightening in terms of how much they will lend.
But please don’t despair, there are many lenders whose policy has not changed, and it is also worth checking what rates your current lender will offer to you – this is known as a product transfer and usually does not involve any affordability checks.
A mortgage broker will be able to run through all your options. I would encourage you to not stick on your lender’s variable rate, as these are increasing at the moment, so will be expensive and will leave you exposed to future rate rises.
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Question
How is the deposit factored into my affordability?
Quick question which is causing me a bit of a headache and I hope you can with! I am a first-time buyer – or I will be soon! I am starting to look at properties and feel a bit confused about how much I have to spend.
So, I have £25,000 approximately saved for a deposit and I earn £37,000 a year. When working out how much I can borrow, do I include the deposit? Also, when is the best time to apply for the mortgage – before or after I find a property?
Answer
All very good questions! So, you would take the maximum you can borrow (up to 5 times your income) and add your deposit funds (do keep in mind you will need to keep some aside for legal costs, etc.) to this figure. This total number is the amount you have as a maximum budget or your purchase.
In terms of applying, I would encourage you to speak to a mortgage broker who will be able to outline your maximum borrowing and obtain an agreement in principle – this will give you confidence around what you can afford and give you credibility when you come to make an offer.
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