Can we afford a mortage with our current joint income and credit?

Posted on 12 November 2007

My partner and I are looking at houses as first time buyers we have seen one at £199,950 that has already been reduced and we know that the seller is desparate to sell so we are hoping to reduce the price as much as possible. I have just started a years contract as a teacher on £20,133 and my partner runs a pub on £22,000 how likely is it that we will get a mortgage for this house? We currently have no deposit as we were not intending to buy until we saw this particular house. Also my partner has just bought a car on finance for £25k and while he assures me this wont have a massive impact on a mortgage as we have no other outgoings I however feel it will have massive repercussions for us. Any advice would be appreciated.

Hi Katie,
 
I am concerned actually that you would be stretching yourselves a little too far on this one. Property prices in the UK are not due to go up this year, meaning that you are potentially landing yourself with a 100% debt, on a property that might, in fact fall in value.
 
A lender will say that you're looking at a mortgage of 4.7 x joint income, or higher depending on the monthly payments due for the car credit. Basically for the car loan, take the monthly payments, times them by 12 to get an annual cost, and then subtract that from your joint income; like a salary reduction.
 
There are very few lenders that can lend that amount at 100%; I would not attempt this without going through a broker, as you will need to be extremely thorough about doing a budget planner, as well as your two year earning projections versus any possible interest rate rises. Abbey or Alliance and Leicester are your best bet, since Northern Rock have pulled out of that sort of high risk deal, (which I'm sure will not be a surprise!) Also, you should try Scottish Widows as they do special deals for professionals, which includes teaching.
 
Please get a five year deal at least: in two years time it is very likely that your property will be worth even less than it is now, and if you still have a similar amount of debt outstanding, you won't be able to get a remortgage very easily, possibly not at all. It is for this reason that I don't think this is the right time for you. If you do want to buy but think that this might be too risky, stay closer to £150,000 and set it up on a repayment mortgage, and use every penny you have to pay off lots of capital in two years to get yourself some equity as a safety-net.

Category: 100%+ borrowing, First-time buyer

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