After the financial crisis, the world changed. The amount that you could borrow for a mortgage took a nosedive, and it seemed as if the era of cheap credit had well and truly come to an end. The Financial Conduct Authority changed the rules governing how big a loan individuals could take out, and they banned 100 percent mortgages altogether. After years of promoting universal home ownership through cheap credit, governments suddenly changed their minds and decided that it was just too risky.
Now the problem for home buyers is different. Instead of just going to the bank and getting pretty much whatever mortgage you want, you now have to pay a pretty substantial deposit. What’s more, the days of borrowing 4.5 times your annual salary look to be long gone, meaning that actually getting the home you want is tough. Here are some tips for increasing your borrowing capacity.
Buy Your Home With A Partner
If you try to borrow off your own personal income, the amount of money you can raise will be quite small. That’s because you’re going off just a single income which usually isn’t a great deal of money. If, however, you have a partner, you can double your effective income and increase the amount you can borrow dramatically. Partners can often afford to take out much more than single income earners alone.
If you charge a daily rate, you can use a mortgage for contractor calculator to see how much you could borrow. Once you factor in your partner’s pay, you’ll be able to borrow a lot more.
Guarantee Your Repayments
During the financial crisis, banks weren’t all that concerned about who they lent money to. The reason for this was that they thought that the prices of houses would always go up and that even if they people who owned the house didn’t pay up, they’d still be able to sell the house for more money and bag the equity. Since then, banks have learnt that house prices don’t just go up automatically. As a result, they’ve now started trying to make sure that the people who take out mortgages are able to pay them back. Some banks are unwilling to lend to people with poor credit histories.
If you’ve got a poor credit history, you may be able to borrow more by getting a guarantor with a good credit history. The guarantor promises to pay the bank the mortgage repayments if you don’t, which helps to reduce the risk that the bank faces. This, in turn, often means that you’re able to borrow more.
Reduce Your Debt
According to Melanie Bien from a real estate finance firm, lenders are becoming more attuned to whether or not borrowers can actually afford to pay their mortgages back. As a result, they’re looking at things like personal indebtedness and number of children. If the outgoings are too high, you may be refused the mortgage that you want which could mean that you’re unable to get the house you want. Bien says that those who want to borrow a lot must save a lot first.
Most importantly, buy when you are ready, not when you think you should be ready.
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