High Multiples
The traditional income multiples – that of 3.5 times a single income or 2.5 times a joint income came into force at a time when interest rates were much higher. While the rate environment over the past few years has been lower, many lenders are sticking to their guns. Partly this is down to ensuring the safest level of borrowing, also it’s to ensure there is no backlash from the likes of the Daily Mail who would be quick to accuse lenders of irresponsibility. However some lenders have become more flexible. It is not uncommon now for lenders to offer four or even five times your income, and a number of others, Nationwide Building Society for example, use an affordability rating – your income is less important than your ability to prove how much you can afford to pay in monthly repayments.
In the current cliamte, lenders don’t want to look like they’re encouraging borrowers to get into increasing debt, but if you can demonstrate you have the wherewithall to safely repay your mortgage, then you may find some solace.
Guarantor Mortgages
The idea that first time buyers will receive help from their parents to buy their first home is not a new one, but it is becoming more common and lenders are finding new ways to let families help out without actually having to part with their cash. The way it looks to the buyer will team up with their parent (usually, although in theory it can be anyone) and their combined income, net of any other mortgage commitments, will be used to assess how much can be borrowed. while the expectation is that the first time buyer will pay the whole mortgage, both parties are liable and will be in trouble if the mortgage falls into arrears. “this is a neat way for the first-time buyers to get financial help from their parents, but without their parents having to liquidate any of their own assets to help them with a deposit,” says one broker. “Some scheme offer first time buyers an income multiple of four times salary, or, more usefully, will lend four times the parents’ income, once the parents’ existing mortgage payments have been deducted. The child may be able to afford the repayments on their own but find it difficult to find anybody to lend a large enough multiple or to fit into existing “affordability” criteria. Or the parents may help out with the repayments for the first couple of years until the child’s earnings improve.
There used to be a number of specific guarantor products around, however that’s not so much the case today. Many lenders will still consider the idea.
