Back in February 2017, Manchester Mortgages visited a young couple in their 20’s looking to buy their first property – they were presently living with one set of parents while saving up for the deposit.
One client was employed currently earning £ 15,000 per year while the other client was self employed and had only started their business in May 2015 with first years profit of £9,000.
The clients had no children and no credit cards or loans outstanding.
If they were to find a property now the choice of lenders would be limited as most lenders will require a minimum of 2 years accounts some requiring 3 years accounts.
As whole of market independent mortgage brokers Manchester Mortgages using their years of experience could recommend a lender that would accept 1 years accounts – based on the above figures the maximum mortgage offered over 35 years would be just under £ 114,000 based on a joint income of £24,000 per year.
The employed client is a trainee accountant and subject to her passing upcoming exams in March her employer has promised an increase to her salary to £17,000 per year.
Based on this increased figure and still only using first year accounts clients joint income would now be £ 26,000 and the lender would increase the maximum mortgage to just over £ 123,000 – therefore a £ 2,000 rise in income increased the mortgage figure by £ 9,000.
Moving on and assuming clients employed income increased to £17,000 per year and second years profits were £15,000 most lenders would average the two years profit
( £9,000 plus £15,000 ) giving a figure of £12,000 therefore joint income would now be £ 29,000 and the lender would increase the maximum mortgage to just under £138,000 – an increase of £15,000.
If self employed profit was £ 20,000 the average of the 2 years would be £ 14,500 and joint income would now be £31, 500 and the lender would increase the maximum mortgage to just under £150,000 – another increase of £12,000.
As the income figures above show the maximum mortgage has increased from £114,000 to £ 150,000 – a difference of £36,000 based on joint income only rising by £7,500 per year.
Alongside their own savings our clients parents are also helping towards the deposit which means the total deposit will be around £40,000 – therefore the purchase price they can achieve dependent on joint income will be anywhere between £ 154,000 and £190,000 – a difference of £36,000 which makes a big difference to size of house and areas to buy in.
Therefore it proves that every £ of income counts !
As clients were looking to buy a property around £190,000 due to the big difference in the maximum mortgage available Manchester Mortgages recommended that the clients wait until the 2nd years accounts were available ( which would be early May 2017) then review the then known joint income figures to obtain the maximum mortgage available.
Manchester Mortgages deal with these and other issues on a daily basis for our clients– we have the experience to sort out any mortgage related problem.
Manchester Mortgages have just submitted a mortgage application for our clients who took our earlier advice and waited for those all important second year profit figures and the pay rise to take place.
The second year net profit figures were £20,200 and the pay rise was indeed to £17,000 this enabled clients to find a house for £184,000 and along with their Help to Buy ISA’s and gifted deposits from both set of parents Manchester Mortgages found them a lender willing to lend £147,200 ( 80% loan to value ) on a 2 year fixed rate at 2.01% with no lender arrangement fees and a £1.000 cash back on completion – which meant mortgage payments of £489 per month over a 35 year term which was within our clients budget of £500 per month.
All mortgages have some sort of twist to them – we know because we deal with them every day – contact Manchester Mortgages on 0161 706 0242 to discuss your requirements or complete and send the Contact Us Form so that we can solve your mortgage problems and help you buy the house you deserve !
Sometimes you have to wait for good things to happen – we at Manchester Mortgages have the patience to wait for the right time to ensure you get the best possible mortgage.