How much can you borrow? Watch a short video about borrowing over on my YouTube channel and read below for the full transcript…
Hello, and welcome to The Mortgage Mum. And thank you so much for joining me again. So today I’m going to talk to you about the biggest question I get asked in the mortgage mum, which is other than how do I become a mortgage mum it’s how much can I borrow? What’s the biggest mortgage I can get? And the answer is not as simple as a YouTube video or an Instagram video, depending on where you’re watching this. It’s actually not that straightforward, which is why we’re here in the first place, but it is really good to give you a bit of an idea so that you can have a bit of an idea with the calculators to how much you can look at. So if you’re employed, it’s fairly straightforward. You can multiply your income by four and a half to five times your income.
There are some lenders that will lend you more than five times, but that is the general range. So that’s going to give you a good place to stop. So I can already tell that you’re picking up a calculator to see if there’s two of you. You add those incomes together, and that’s going to give you a ballpark figure. However, if you have a car loan, if you have credit cards, if you have any other outgoings that are fixed, then they’re going to come off your affordability. So one of the biggest things we say to our clients is if you’re thinking about getting that new car, please wait, please wait until you’ve done your mortgage and it’s gone through because often people don’t realise, and they then get a car loan just after they’ve applied for a mortgage. And it completely throws out your affordability.
If you’ve got a loan, it is about the monthly repayment, as opposed to the whole thing, particularly when it comes to cars, but it is coming off your affordability. So if you’ve grabbed a calculator and you’ve got yourself, that ballpark figure, that’s going to come off your income. So it is going to make a difference to affordability, other things that may affect it are childcare payments and student loans, for example. So it’s just thinking about it logically it’s anything that comes off of your pay, because it’s all centered around that. Now, if you’re a contractor, how we work out, your income varies. So it’s based on your day rate and there’ll be a whole, well that be a whole video on that for one, but there was a podcast episode already on the podcast about how we look at that and how that’s calculated. Every lender is different, but essentially it will come down to a day rate and we’ll be looking at how long you’ve been doing it.
And how long is left in your contract, because that’s a little bit different if you are. Self-Employed, we’re looking at the last two years worth of accounts, some lenders will let us look at just one year, but they’re fewer and further between if that’s how you say that phrase in that way. They’re few and far between they’re not as common. As somebody that’s got two years worth of accounts and we’ll be looking at, at an average of days now, if you’ve been affected by COVID, there are lenders that treat that differently. We will need to ask you how you’ve been
affected, how the business is now performing. Did you take advantage of any of the loans or government grants? So there’s a lot more questions for you guys are self-employed or for obvious reasons, but essentially we’ll average your income. And again, we’ll multiply that in the same way. So self-employed mortgages, they’re not a separate thing. It’s just how we look at your income. And the other thing to consider is if you do overtime, which lots of people make up their income with a commission or bonus or a time, every lender will treat them differently as well. So it makes our life a little bit harder, but us have a really meaningful role here because what we’ll do is look at how your income is made up. And then we know once we’ve seen the combination, what lenders are going to be the best place to get the most out of your income, say, do take that into account when you’re looking for a broker versus Googling it and doing it yourself or going to your bank, but there’s going to be a whole other thing on that soon.
So how much can you borrow on a mortgage? Well, basically it’s down to how much you earn, how much you owe, and then the best multiplication that we can get you on the market to borrow the most amount of money. Now, if you are looking to borrow extra and you already have a property it’s worth mentioning that you can borrow a lot more using a secured loan than you can a mortgage. So if you’re someone that’s dreaming of an extension or dreaming of a loft extension, another form of extension basically, but you want to release money for home improvements, for example, and you already property that has equity in it, there might be a better way for you. So speak to us and we’ll explain how a secured loan could benefit you. If you’re one of those, but there’ll be a video soon just completely dedicated to that coming up very soon.Thank you so much. I hope that’s helped. Keep your eye on this channel for all things mortgages so that you can really boost your knowledge so that you are the one in the driver’s seat when it comes to a mortgage. Thanks for listening.
***
Catch up on other blog posts from The Mortgage Mum here.
Sign up to The Mortgage Mum email newsletter here.
