A mortgage is a loan used to buy property. In 2019, as in other years, getting on the mortgage ladder still proves to be challenging for many people, but what is more apparent is that even once you are on the ladder, affording a bigger property is just as tough. But what are the biggest factors affecting mortgage affordability in 2019?
Understanding what lenders are looking for – affordability
Mortgage providers are looking for buyers who can afford to make repayments on their mortgage and so for would-buyers, it is essential that you prove you can do this.
Affordability checks are much more stringent than they used to be, a fact pointed out by credit reference agency @ClearScore. Prior to 2007, it used to be a lot easier to get a mortgage according to a recent article and so today, you’ll find that the affordability assessment is stringent.
Some lenders are generous, offering 5.5 times your annual salary but most lenders are around 4.5 times your salary and anyone else you buy with. For first time buyers, a recent survey by Which? found that first time buyers were lent on average 3.66 times their income.
As well as looking at how much you earn, mortgage providers will also conduct a stress test of your income. This is where they look at outgoings and existing debts, working out your ability to pay off your debts in the long term. Part of this will be looking at your lifestyle, how your finances will cope if interest rates rise.
If your lender doesn’t think you’ll be able to afford the mortgage, they can either limit the amount they are willing to lend you or refuse your mortgage application completely.
Being on top of your finances
If you are considering applying for a mortgage or are considering moving home, you’ll need to be really on top of your finances. By that, we mean being proactive in managing your money to show potential lenders you have a great track record with your income.
Living with your means is a phrase used to describe not just overspending each month, but planning your finances with the future in mind.
Making sure you meet your financial obligations each month is one of the biggest factors affecting mortgage affordability in 2019. So a track record of unpaid direct debits is not going to make you an attractive proposition to mortgage lenders.
Understanding your credit score is part of a mortgage application. Getting this figure as high as possible means that when you are offered a mortgage, it is at the most suitable rate possible. This is because the lender will see you as less of a risk if you have a great credit score.
Managing debt is also an important part of affordability. Not having debt is clearly the best position to be in, but this is almost impossible in the modern age. But showing that you can afford and manage your debt is what lenders will be looking for.
Are you a first-time buyer? Or maybe you are searching for a mortgage to move home? Contact us to arrange an appointment to find out more about mortgage affordability in 2019.
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Written by: Cambridge Web Marketing