|
|
|
|
|
Affordability -
In recent years lenders are tending to move away from income multiples and are opting instead for ‘ Affordability Calculations’.
The lenders that lend on affordability use criteria to calculate the amount you can borrow. This depends on factors such as the number of adults in the household, number of children or dependents, the length of mortgage term, type of product i.e. interest only or repayment, loan to value, credit scoring and monthly outgoings before mortgage repayments.
Affordability Calculations are seen as to be more accurate than income multiples as they look at individual circumstances
For Example - if there are two couples on exactly the same income but one couple has 2 children and a dependent older relative, income multiples would lend each couple the same amount. Affordability calculations would lend different amounts as the second couple have a lower disposable income.
Lenders that use affordability calculations have an online calculator on their website as a guide to how much they will consider lending you. Some lenders have more than one calculator depending on whether you can prove your income (Full Status) or if you can’t (Self Certification). The latter one is a higher risk to the lender thus the amount lent will generally be less.
The main downside of Affordability Calculators is that they are only as accurate as the information you put in. If you guess your income or you are put the income in the wrong box, the calculator will not give an accurate figure which could be more or less than you are looking for. Some also depend upon the credit score that each client is given once the application is in and applicants are never told what this is, so how do you know which one to choose?
|
|
|
