Moving up the property ladder
Much has been made of the struggle to get on to the first rung of the property ladder in the wake of tighter mortgage availability and lending criteria over the last year, but those looking to take that second step and move up to a bigger property can also experience difficulties.
After deciding to move to a larger home, and having had an offer accepted on their property of choice, our clients came to the mortgage service for the Guild of Professional Estate Agents in need of advice and a quick turnaround.
They had initially approached their existing lender with a view to porting their mortgage across to the new property and increasing the size of their loan, but their purchase was jeopardised when they were informed that they had been declined on the basis of affordability, despite having a 40% deposit to put down.
Where standard income multiples were once the norm, affordability calculations are now used to determine applicants borrowing potential. Many lenders use figures from the Office of National Statistics to estimate average household expenditure based on different customer profiles as part of their lending decision, while others require a much more detailed breakdown of family spending.
The approach from lender to lender also varies, as it always has done, depending on their attitude to more significant outgoings such as childcare costs, and pension contributions – which some lenders will include as a financial commitment while others will not. The overall decision as to what size loan is considered affordable can therefore vary significantly.
If you are looking to move up the property ladder and want an idea of how much you can borrow, then lenders do have affordability calculators on their websites, but some may only be a basic indicator. Talking to a mortgage adviser who knows the whole market will give you a more accurate and rounded idea of your borrowing potential, as well as ultimately providing guidance on the most appropriate lenders to approach and the best deal for your circumstances.
Our clients were placed with another high street bank more suited to their needs, both in terms of the lending criteria regarding affordability, and speed of service. They received their mortgage offer within 2 weeks, and are now waiting to complete the purchase of their dream family home.
Guild Mortgage Service, Provided by London & Country Mortgages
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