Here at MortgagesRM – Fee Free Mortgage Advisor in Doncaster, we always like to help and give you much information on how much interest you should be saving for your mortgage….
If you’re putting away a little each week or a lump sum each year, it’s always a good idea to have some money saved over for a rainy day, using a savings calculator will give you that boost of confidence and the idea of what interest you might receive after tax each month – at the end of the day, you want to make most of your money.
However, before applying for a mortgage, you might want to think how you will afford the monthly payments – as some mortgages are different, meaning you could be more or less than your next-door neighbour.
Not so long ago, Stephen Kerrigan you friendly mortgage advisor from Doncaster, remembered when mortgage lenders based the amount you could borrow money from your current income. This is known mainly in the mortgage and the property industry as loan-to-income ratio.
For example, if your annual income was £50,000, you could be entitled to borrow three times the amount, if the mortgage was up to £250,000. However, when you apply now for a mortgage, the lender will cap the loan ratio at four ½ times your current income.
The lender also must assess what level of monthly payments you can afford, such as personal and living expenses as well as your wage. This is called affordability assessment and the changes that were brought into when this effect came in was done by the Financial Conduct Authority in 2014 after they reviewed the property market.
What if I got made Redundant?
Being made redundant is the most soul crushing experience that anyone can go through, however, this doesn’t mean you should stop looking to get a mortgage.
The Lender must look ahead and the stress of the ability to repay your mortgage, take into account that the effect of redundancy could have an increase on interest rate rises and possible lifestyle changes such as, having a baby, or taking a career break.
Here’s a tip from Stephen Kerrigan: If the lender thinks you can’t repay your mortgage payments in full then this will affect the limit on how much you can borrow. Comparison websites are a good starting point for anyone trying to find a mortgage tailored to their needs.
What will the lender need for my income?
When working out how much you can afford to take out, the lender will look at the following, such as:
Pension and investments income
Child maintenance and financial support
Other earnings such as: bonus payments, second job, or freelance work.
Building and travel insurance
The Lender also assess whether you’d be able to pay your mortgage if:
You or partner lost their job
You couldn’t work due to illness
Your life changed, such as having a baby or career break.
It’s important that you also think ahead and plan how you’d meet your payments.
For example, you can help to protect yourself against unexpected drops in income by building up savings when you can.
Try to make sure it contains enough for three months’ outgoings, including your mortgage payments.
How much Interest can I borrow?
Using MortgagesRM – Fee Free Mortgage Advisor’s calculator will show you how much a lender could offer you and if you’re eligible to gain loan-to-income support.
Also, use the calculator to help find out how much your monthly payments would be if interest rates rose in the future.