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Mortgage Income Multiples Vs Loan To Value


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HOLA441

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

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HOLA442

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

Cool That means price will crash soon,.

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HOLA443

is there any level of loan to value below which the banks stop worrying about income multiples altogether?

I'd hazard a guess at around 50% - i.e. the maximum 'conceivable' drop in value... BTW I do hope you're joking...

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HOLA444

I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

I've never tried to disuade anyone from buying on this forum, especially if they feel comfortable with the finances, but in your case I'll make an exception. Don't do it!

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HOLA445

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

0%

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HOLA446

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

suggest you speak to an independent financial adviser.

I recently applied for a mortgage.

with perfect credit scores, a 75% deposit, regular earnings on PAYE, and minimal outgoings I was told the most I could borrow would be about 5 times joint income.

10 times would be fairly absurd, as I'm sure you're aware. a 25 yr repayment mortgage at 5% rates would be account for over 70% of your pretax income. that is a lot.

Edited by the flying pig
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HOLA447
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HOLA448
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HOLA449

In a word, no - assuming you want to pay a reasonable (i.e. affordable) interest rate.

And let's face it, unless you're paying less than 5% then you wouldn't be bringing in enough each month to make the repayments on a 5x loan.

Right! we should not be fooled into thinking 5% mortgages are cheap either. A normal rate over 25 years might easily be 7% and higher. We have inflation locked in by QE and costs are rising around the world and the increases are becoming more pressing.

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HOLA4410

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

Have you consider buying a smaller house / a less posh area ?

Bank has a duty to ensure that you are able to pay back the loan (FSA rule)... so affordability first, LTV second.

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HOLA4411
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HOLA4412

I would say the percentage deposit you put down will only make a difference to what interest rate you pay.....the amount you borrow has no relevance to the deposit amount..... the amount you borrow is dependent on your ability to repay the debt out of available disposable income....that is responsible lending/ borrowing. ;)

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HOLA4413

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

Imho - if your mortgage is anything over a MAXIMUM of 3.5 x your REAL, NON-LIAR income --- you are fooling yourself... It is THE MAIN REASON we are where we are today...... :rolleyes:

We are living in a world completely tainted - POISONED - by the effects of LIAR LOANS - which have fraudulently inflated all local prices - and - which have forced EVERYONE ELSE in all localities/neighbourhoods to effectively take out a LIAR LOAN in order to match/keep up with their local fraudulently inflated "prices" resulting from the initial LIAR LOANS taken out...... :rolleyes:

The poison in the mud is, richly & slowly leaching out its misery on us all..... We are living with the consequences......

Edited by eric pebble
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HOLA4414

I would say the percentage deposit you put down will only make a difference to what interest rate you pay.....the amount you borrow has no relevance to the deposit amount..... the amount you borrow is dependent on your ability to repay the debt out of available disposable income....that is responsible lending/ borrowing. ;)

Yep, income multiples apply regardless of the LTV.

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HOLA4415

After more than a decade waiting for sanity to return to the housing market I am finally staring defeat in the face and giving serious consideration making my life's first and possibly last house purchase some time in the next couple of years. In keeping with the (implied) official recommendation of successive governments I intend to borrow far in excess of my ability to repay, particularly as measured by a multiple of income, i.e. I would be looking for a mortgage in the region of 6 to 10 times my recent average (freelancer's) salary. So my question is - is there any level of loan to value below which the banks stop worrying about income multiples altogether?

You're nuts.

LTV do not matter.

They care - at last! - about your ability to service the mortgage debt not whether you can do the financial equivalent of doing 70mpn in a Robin Reliant - i.e. wind behind you, down steep hill for 5 minutes.

You're a freelancer. You're too risky. You will struggle to get anything beyond 2 times certified income with 60% deposit. And you'll pay over the odds for it.

In general, if the cost of the mortgage payment - interest + capital - is more then 30% of your take home then you'll be classed as high-risk.

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HOLA4416

Seriously? Since when? What happens when they fail this rule?

At the core of the proposals are three principles of good mortgage underwriting:

Mortgages and loans should only be advanced where there is a reasonable expectation that the customer can repay without relying on uncertain future house price rises. Lenders should assess affordability;

This affordability assessment should allow for the possibility that interest rates might rise in future: borrowers should not enter contracts which are only affordable on the assumption that low initial interest rates will last forever; and

Interest-only mortgages should be assessed on a repayment basis unless there is a believable strategy for repaying out of capital resources that does not rely on the assumption that house prices will rise.

Officially comes in force in 2013, but many lenders already adopt the approach..

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HOLA4417
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HOLA4418

suggest you speak to an independent financial adviser.

I recently applied for a mortgage.

with perfect credit scores, a 75% deposit, regular earnings on PAYE, and minimal outgoings I was told the most I could borrow would be about 5 times joint income.

10 times would be fairly absurd, as I'm sure you're aware. a 25 yr repayment mortgage at 5% rates would be account for over 70% of your pretax income. that is a lot.

5 times joint is probably 7-8 times the single.

plus your liar application salary...

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HOLA4419

Officially comes in force in 2013, but many lenders already adopt the approach..

Ah - because I was going to say if these rules were there during the last decade and a half, there would be a serious mis-selling case brewing...

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HOLA4420

Officially comes in force in 2013, but many lenders already adopt the approach..

lenders have always had official criteria...in fact, 5 times salary was officially sanctioned in about 2007 for those earning 50K or more.

To bypass this, and provide thousands of IFA jobs, people needing "special" terms are put through to brokers...who can "scan the market" for a deal.

to me, if there are deals to be had via a broker, and not through official channels, then the rules are being broken by a bank somewhere, regardless of the "official position".

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HOLA4421

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