Mortgage and finance

The finance decides what you can buy, how strong your offer looks, and how fast you complete.

Most people treat the mortgage as something to sort out after they have found a property. It is the wrong way round. Your finance decides what you can realistically look at, how a seller reads your offer, and how quickly the transaction moves once it is agreed.

We are not mortgage advisers and we do not sell mortgages. What we can do is tell you how the finance side affects the property side, and introduce you to independent advisers who are properly authorised to advise you.

Start with the arithmetic

Before you view anything, it is worth knowing roughly what you could borrow and what the purchase will actually cost.

• How much could I borrow? gives an indicative range from income, deposit and existing credit
• Stamp duty calculator covers both English and Welsh purchases, which are taxed differently

Neither is advice. They are arithmetic, to stop you searching in the wrong price bracket.

What lenders actually assess

Income multiples

Most mainstream lenders work within four to four and a half times income, with a stretch tier above that for stronger applications. That is the headline, not the decision.

Affordability

Underneath sits an affordability assessment. The lender models your real outgoings and then stress-tests the payment against a higher rate than you would pay, to check it would still be manageable if rates rose. Two applicants on identical incomes can be offered materially different amounts.

Loan to value

Your deposit sets the loan to value, and the loan to value sets the rate you are offered. The bands matter: moving from a 90% to an 85% loan to value is often worth more over a fixed term than the extra deposit costs you.

Credit profile

Loans, car finance, card balances, dependants and any adverse history all reduce what is available. Clearing short-term credit before applying usually helps more than people expect.

Why a decision in principle matters to a seller

A decision in principle is a lender's provisional indication of what it would lend you, based on a credit check and the information you have given.

It is not a mortgage offer and it is not binding. But when a seller is weighing two similar offers, the buyer with a decision in principle and a solicitor instructed is the one who looks able to proceed. That is worth real money in a negotiation, and it costs you nothing but an afternoon.

Buying to let

Buy-to-let lending is assessed differently. Instead of income multiples, lenders test whether the rent covers the mortgage interest by a required margin, stress-tested at a notional rate. A property that stacks up on yield can still fail a lender's rental cover test.

Our rental yield calculator covers the income side, and buy-to-let mortgages goes into the finance in more detail.

Timing, and the trap in it

A mortgage offer has an expiry date, usually somewhere between three and six months from issue. On a straightforward purchase that is ample. On a new-build bought off-plan, where completion may be a year away, the offer can expire before the property is ready, and you may need it re-issued against whatever rates and criteria apply at that point.

If you are buying off-plan, raise this with your adviser at the outset rather than discovering it later. See off-plan sales.

What we can and cannot do

We can explain how finance affects your position as a buyer, tell you honestly how your offer will read to a seller, keep the transaction moving between solicitor, lender and the other side, and introduce you to an independent adviser.

We cannot recommend a mortgage, tell you which lender to use, comment on whether a particular product suits you, or arrange finance. Those are regulated activities and we are not authorised to carry them out.

If we introduce you to an adviser, we will tell you at the time whether we receive any fee for that introduction.

Speak to us about the property side

Call 020 4635 8543 or register your requirement and we will tell you what is realistic in your bracket.