Stretching exercises…
Bagging your dream home with higher mortgage income multiples
We are sure you’ve noticed that house prices are out of control at the moment, with them increasing nearly 14% between June 2020 and June 2021. This is the fastest increase since 2004! If you are looking to buy this means bigger deposits, bigger costs and a bigger mortgage. This year a third of employer’s have frozen pay too, which could also mean you are being stretched. All this leads to one thing, needing a higher mortgage income multiple
Warming up
Fortunately a number of lenders have started upping their mortgage income multiples in certain situations. These have provided some of our best success stories (and some tales of woe I will come on to!) in the last couple of months.
Lenders like Aldermore and Nationwide can potentially offer a mortgage income multiple of up to 5.5 times. Nationwide need your income to be £31,000+ for single mortgage applications and £50,000 for joint applications. Aldermore just your income to be £50,000+ regardless of the number of applicants. Both lenders offer this with deposits as little as 10%
Most recently, Aldermore this week launched a 2.4% rate to borrow at 5.5 times mortgage income multiple.
Other lenders can offer higher mortgage income multiples, even up to 6 times, if you are a ‘professional’. You will often need to have qualified in an area like accountancy or medicine within the last 5 years.
There are other logistics you need to be cautious with such as criteria in other areas like your credit history, employment (Nationwide for example will not offer these higher multiples to self-employed individuals) and your income sources. If you are employed, your basic pay will always be fine in counting towards the minimum income. However, if you have variable pay like bonus make sure you are using the same average the lender will use when checking eligibility (e.g., do they use the most recent 3 months, 6 months’ pay)
How to avoid an injury!
The roll out of these schemes have not been without teething problems. We have seen lenders decline to offer the 5.5 times multiple weeks into the application on a discretionary basis. For example, where the client had previous credit blips, is a fixed term contractor (even where the client was a junior doctor of all professions!). In all cases we agreed these factors with the lender up front and the client did meet the criteria for the 5.5 times income!
So how can I get 5.5 times income with these hurdles and moving goal posts?
This is a biased opinion but speak to an experienced mortgage broker, they will know best what is going on behind the scenes and whether or not you fall into the ‘discretionary’ areas lenders say they will accept, but then later won’t!
See our previous guide on other scenarios where you may struggle to obtain a mortgage here
Have a read of how we have helped others in your situation here
Give us a call on 01174420604, email to info@advantagefs.co.uk or book an appointment using the details below!
