Through our experience as a Mortgage Broker in Durham, we find that many customers, particularly first time buyers in Durham, ask us the amount they can borrow for a mortgage. To start, we will look into the background of affordability assessments and how much they apply post-2014.
Before the days of credit scoring, mortgages were manually assessed by your local Building Society Manager. In the 1990s, lenders slowly moved towards a more uniform income assessment to provide a more consistent approach.
In order for customers to not borrow more than 3-4 times their annual income, maximum lending “caps” were introduced.
In the midst of the credit crunch in the 2000s, these income multipliers kept becoming more and more generous. Obviously, some lenders allowed their customers to “self-certify” their incomes with no background checks like payslips.
Unfortunately, this led to the financial disaster that occurred from 2008-2010 and resulted in many people struggling to get onto the property ladder. This was due to lenders creating a cautious (over-corrected) lending environment.
The Mortgage Market Review (MMR) was introduced in 2014 when the market finally recovered. This introduced a new set of guidelines for lenders to adhere to. As well as this, the old income method was stopped and replaced with new, more sophisticated affordability calculators.
These new calculators gave a more in-depth look into an applicant’s spending habits and net disposable income. This meant that the Lender could have further insight into your bank statements to ensure that unaffordable mortgages were not granted as they were before the Mortgage Market Review was introduced.
Today, there is still a “lending cap” in place at about 4.75 times your annual income but your expenditures are also analysed. For instance, lenders seem to penalise low-earners and sometimes factors like gambling can sometimes affect your chance of being lent the money. In some cases, they take pension contributions as a fixed outgoing so would usually lend, say a public sector worker with a big pension deduction less than a private sector and so on.
For those looking to maximise your borrowing capacity to get the home you buy, our team recommend that you get in touch with an expert Mortgage Broker in Durham, like ourselves. When you contact us, we will connect you with an expert Mortgage Advisor in Durham who will research the property market for you and look to find a lender that will lend you the amount you need lending.
Prior to taking out a mortgage, you should seek Mortgage Advice in Durham as this can help you with arranging your finances to make sure that you are in a stable situation to keep up the repayments. Here at Durhammoneyman, we offer all our customers a free mortgage appointment which can book online or by getting in touch with our team!
Date Last Edited - 04/01/2023