There could be an array of reasons why someone may seek to maximise the amount that they can borrow including the high house prices of the desired location of a property purchase or low salaries for an initial house purchase to get onto the property ladder.
How to Access Higher Loan to Income Mortgages
The traditional high street lenders may not be able to offer higher borrowing limits to mortgage applicants and therefore often the best approach to explore such options would be to liaise with a specialist mortgage broker.
A mortgage broker will have access to the wider financial markets to be able to advise on the current market conditions, pass on knowledge of recent lending history, as well as compare deals tailored to the individual borrower’s requirements.
Any highly recommended mortgage broker should be able to seek and advise on the requirement of a higher value mortgages for a range of circumstances, such as:
• Homeowners seeking to trade up their property within an expensive property area.
• Professional first-time buyers earning at least £40,000 a year.
• First-time buyers with low deposits, within certain career categories.
As with any financial product application, the credit score of the applicants, the value of the property and the level of deposit or equity will all play big parts in the calculations that determine the levels that lenders will be prepared to offer for mortgages. Criteria can vary from one lender to another.
Lenders are keen to do business with professionals who are deemed to be high earning, insecure roles, who are also set to progress up their career path fairly promptly and therefore continue to make regular mortgage repayments.
Therefore, some of the usual risks of unemployment or mortgage default are less likely, and consequently, lenders can be prepared to offer higher loan to income borrowing to those deemed professional workers.
Pushing the traditional mortgage calculation
Historically, the mortgage market has been based on a salary-multiplier calculation restricting borrowers to 4 or 4.5 times their annual salary.
However, following an industry review in 2014, there was a shift from maximum loan values to affordability calculations and therefore more information is reviewed throughout the application process to ensure that other expenses can be factored into the monthly household budgets.
Also, when lenders are reviewing an applicant’s affordability, they must factor in a buffer to accommodate changes such as inflation of bills and interest rate rises.
• Maximise earning status and income – Mortgage lenders will look favourably at an applicant with a permanent contract over a temporary staff member, and therefore in advance on a mortgage application it would be advisable to secure a permanent employed role. Also, exploring the options of a pay rise with a current employer will bolster lending power
• Getting organised – A mortgage application will require the collection of a range of documents to prove identity, confirm an applicant’s address, undertake employment checks and provide a record of regular expenses. Getting such documentation organised ahead of an application can save time and delays later on.
• Streamline debts and cleanse expenditure – Along with affordability checks, lenders can also review everyday payments. Certain transactions can raise alarm bells such as debt repayments to multiple credit cards or store accounts, as well as gambling payments
• Review credit report– Ahead of a mortgage application is it advisable to undertake an audit of all accounts as well as request a free credit report to check it for errors.
A credit history report contains many pieces of information including details of missed payments, details of financial related links such as previous partners, as well as ratios of borrowing levels.
The output from a report often provides a credit rating which will be used by lenders when reviewing a mortgage application and therefore is vital that all of the information underpinning a credit score is correct. Always ensure that there is plenty of time to log any queries with the credit referencing companies before an application.
• Improve credit scores – Following the process of checking a credit report, should the score be less than perfect, some steps can be taken to boost it up.
After any queries have been resolved, there are a few options to improve a credit score including; registering on the electoral roll, de-linking from previous partners, using rebuild cards to build credit history and ensuring that all bills are paid on time.
Once the groundwork has been put into place to be in the best position for an application, it would be worthwhile approaching a mortgage broker to review an applicant’s eligibility, the objectives of higher borrowing and search the market for the most appropriate competitive options.
Mortgages 5 Times Salary Summary
As with any financial decision, it’s always recommended to seek independent financial advice before committing, ensuring that all terms and conditions are fully understood.
Independent brokers will also have access to the whole of the market, rather than just high street lenders and therefore will often be able to compare a wide range of options.
It is worth noting that all secured lending will have consequences to owned assets if the repayments are not kept up.
Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.