Many lenders now approach the question of how much someone can borrow based on affordability. This will take into consideration your income(s) and in turn any outgoings such as ongoing credit commitments and your day to day living expenditure working on the number of applicants and the number of any dependants.
Although your ability to afford the loan is what the lender needs to establish they may also work on a maximum income multiple. This can vary from lender to lender with these typically ranging from 4x to potentially 5x your income(s). Working on a combined income of £40000 this could equate to between £160000 to £200000.
With such a varying array of methods used by lenders to assess this critical aspect of your plans, the best first course of action is to speak to one of our advisers. They are experienced with working with specialist lenders, and will know the best way in how to look to get you the mortgage you need and will be able to help you understand the steps you need to take to get there.
What is Loan To Value?
The loan to value (LTV) is a common way for lenders to show how much of a mortgage you can obtain against the value of the property. This is best thought of as how much deposit do you need to have in order to get the mortgage. With bad or adverse mortgages the LTV is very important as the less you need to borrow, the more likely it will be that you get the mortgage.
As with all mortgages, the lower the LTV, the lower your monthly payments are likely to be, but this does mean you will have to pay more up front. With any kind of mortgage, whatever your credit history, putting down a larger deposit can be worthwhile, but it is not always essential.
Mortgage up to 95% LTV
For many with a history of bad or adverse credit a larger deposit will typically be required than the usual industry minimum. The average minimum requirement is 15% or a maximum of 85% loan to value but this will very much be dependent on the overall assessment of risk.
If you find the right broker who has an unlimited access to lenders, finding higher LTV mortgages (even as high as 95%) could still be possible – even if you are worried about your credit rating. We at Just Mortgage Brokers work hard to ensure that all clients, even first time buyers with a poor credit score, have the ability to be considered for a mortgage.