Over the past few years, mortgage providers have been forced to tighten their rules on affordability. In the past, lenders would just have looked at your payslip. These days, they want to know about all of your financial commitments and how exactly you spend your money. As a result, applicants are now asked to provide a huge amount of information when applying for a mortgage. If lenders feel that applicants have too many financial obligations and therefore won’t be able to afford repayments, they may well reject the application and decline to offer a loan.
As childcare is a major expense for most working parents, it often comes up in mortgage affordability assessments. Understanding exactly how your childcare costs could impact on your mortgage application is therefore very important if you’re going to balance your finances and secure your dream home. Keep reading to find out more.
The cost of childcare
According to a recent report from the Family and Childcare Trust, most working parents now spend a staggering 20-30% of their salary on childcare. This figure has risen sharply in recent years as the cost of nurseries, play schemes, and afterschool clubs has gone up. As childcare now makes up such a large percentage of spending, mortgage providers take it into account when calculating affordability. If they think that applicants are spending so much on childcare that they’d struggle to meet their mortgage repayments, lenders may decline to accept a mortgage application.
According to BT, “One in six families found childcare costs to be their downfall when making a mortgage application.” This surprisingly high figure shows just how much of an impact childcare costs and affordability tests are having on homebuyers. In many cases, parents will struggle to secure a loan for the amount they need, something that could well prevent them from purchasing the property they’ve put an offer on.
How to get a mortgage if you have high childcare costs
If you have high childcare costs and are looking to secure a mortgage, there are a number of things you can do to boost your chances of success. For a start, it’s a good idea to look at your current outgoings to see if there’s anywhere you can save money. If you can’t reduce the amount you spend on childcare, look to see if there are any other areas where you could save.
For example, if you have an expensive gym membership or another regular expense, consider cancelling it and looking to see if there are cheaper options prior to your application. This should help to improve the results of affordability checks and increase the chances that your loan application will be accepted. Alternatively, you could consider applying for a smaller loan. The less you borrow, the smaller and therefore more affordable, your mortgage payments will be. This should encourage more lenders to offer you the loan you need.
The best way to ensure you secure the mortgage that’s right for you is to get expert advice before you apply. Take a look around our site, or give us a call to find out more.
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Written by: Editorial Team