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For many years, the simple answer to the question ‘how much can I borrow’ was ‘a multiple of your income as shown on your P60 or payslip’. Some mortgage calculators, high street lenders and price comparison websites still quote a basic formula like this, even when giving guidance on the amount that a self-employed professional or entrepreneur might reasonably expect to borrow.
Frankly, for most people looking for a mortgage nowadays – especially those with multiple sources of income – the answer is more complex than that. You might be able to borrow more than you expected to, but, following the tightening of lending criteria last April as part of the Mortgage Market Review, you may well find that your own bank does not want to take the time or trouble to understand exactly how you receive the income that you will use to pay off your mortgage. And that’s where the advice of a specialist, independent mortgage broker can prove invaluable.
There are a number of basic factors that influence how much you can borrow, including:
This last factor is often the one that requires a bespoke solution, not generally found on the high street.
In essence, the lender will try to assess the affordability of the loan that you require and the likelihood of your paying it back on time and in full. Like many transactions, such an assessment is usually subjective and is therefore open to negotiation. Specialist mortgage brokers are used to representing their clients, dealing with many different lenders and presenting the most compelling case to the selected lender’s underwriters, who then issue an offer of loan amount and mortgage rate based on their ‘risk appetite’ – i.e. how badly they want your sort of business on their books.
Regularly we help people whose own high street banks fail to understand their income sources; we can match their requirements to a lender more likely to meet them. In this case, one of our experienced brokers helped the client present his income, outgoings, assets and liabilities to a lender in such a way that it could make a decision based on his entire financial position. And that decision made the difference between buying the home of his dreams and losing out to someone else.
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