The dark art of mortgage affordability exposed
Unwary first-time buyers could be pushed needlessly into smaller properties or different areas due to the ‘dark art’ of mortgage affordability calculators, a This is Money investigation can reveal.
Based on a joint income of £75,000 and a deposit of £25,000, This is Money uncovered a near £200,000 difference between the most and least generous indicative maximum loan amounts. For those who do not shop around, this could seriously dent their aspirations.
The rise of mortgage lenders’ affordability calculators has seen most banks and building societies direct those looking for a home loan to them, to see what they can borrow. Yet the gulf between these indicative sums across lenders is huge.
Buyers should be aware that mortgage calculators are a simple device used as a marketing tool. ‘ What they really are is an indication of a lender’s appetite for a certain borrower. At a given time, it may be looking to upsell affiliated products and services to, say, young families who have lots of financial needs - such as wanting a personal loan to buy a new car, for example,’ said Simon Collins, a mortgage expert at broker John Charcol.
‘Mortgage affordability is a real dark art,’ said Collins. ‘It’s practically impossible for consumers to work out which lender will offer the most generous mortgage amount. The most information they can attempt to get their hands on is the lender’s criteria, which they are meant to publish under the income section of their mortgage information that appears on their websites.’
Therefore, buyers be aware of this when starting your research. It is usually best to visit and speak to as many brokers as you can. Lending criteria differ from lender to lender and change frequently, so it is important to speak to an experienced broker or mortgage adviser to ensure you have up to date information. After all, you want to make an informed decision on one of the biggest and most important purchases you will ever make.