It is fairly normal when you start looking for something to buy that you know how much you can spend. Imagine walking in to a shop without knowing how much cash you had in your wallet until you got to the till – it would make picking out something to buy quite tricky. What if you really liked something you’d picked but didn’t have the cash to buy it. That would be quite the let down…
Since the “new” affordability rules came in to play in April 2014, calculating your borrowing potential has become something of a dark art.
The focus of lending has now moved from the traditional multiple of a person’s income to what an individual can reasonably afford and this means lenders will analyse your spending patterns from the last 3-6 months (for a typical borrower) before determining a “safe and appropriate” commitment that you can make.
They must also include in this payment, an allowance which ensures you would still be able to afford the payments should interest rates increase. This is often referred to as a “stress rate” calculation.
Is the borrowing criteria the same for everyone?
Unfortunately not. If you fit into one of these categories you may need to provide 2-5 years of financial information before a decision can be made.
Directors with than 25% equity shareholding
So how can I maximise my borrowing capability?
The key to maximising your borrowing potential is preparation. With a lender requiring access to your previous finances, planning well ahead is key. Here are some quick tips for improving your borrowing capability.
- Clear any short term debts such as small loans and credit cards
- Make sure your regular spending does not result in you going over your overdraft limit or incurring charges from your bank for poor planning
- Use the money you’re saving on cutting down your spending to increase you deposit (an increased % deposit can significantly increase your borrowing power AND reduce the rate of interest you will pay)
- Make sure you are on the electoral role (this is critical)
- Avoid job changes / career changes / changing from an employed role with a fixed salary to being self employed (self employed applicants usually need 2 year’s track record of income)
- Check your credit report using a service such as Experian, Equifax, or Call Credit and make sure there are no hidden surprises (we’ve seen people declined a mortgage over a £20 late payment on a mail order catalogue)
Your home may be repossessed if you do not keep up repayments on your mortgage.
Want to know exactly how much you could borrow?
No matter how challenging your circumstances, Credius has a wealth of expertise to help you maximise your borrowing potential and ensure you get the deal that’s right for you. Call us today to arrange an appointment on 020 7562 5858.
Alternatively why not check out our Mortgage Affordability and Mortgage Cost Calculators here –
Please note these calculators should be used for guidance only
Next time: Can I have more than 1 mortgage?