How accurate are affordability calculators? spendaholic1986

Hi there,

I've been online using some of the high street banks more detailed affordability calculators to see what we could borrow and I just wondered how accurate they are?

I am currently paying off credit card debt but even with my exsisting debt of £7000 the affordability calculators suggest we could lend up to £219900 on one and £176000 on another. Our combine income is £46,000 and we we're hoping to buy a house for between 170000-180000 with a 10% deposit.

Do mortgage providers mark your creditworthiness in the same way a credit card provider would? I only ask as I have no late payments, defaults etc but only get offered bad credit products on comparison sites? I imagine this is due to my large credit card balances (paying off between 500-700 per month).

Sorry for the ramble!

Any lender will consider the credit card debt against the amount you can borrow together with any other committed outgoings and travel costs etc.

Have you filled in a more detailed affordability calculator like Nationwides? and make sure you fill it in accurately.

The only way to get a real indication is when you get an AIP - they will do a credit check at the time that you make an application and it will take around 25minutes to do.

I would have thought that a mortgage of £162,000 on a combined income of £46,000 is perfectly feasible - subject to your credit worthiness and the nature and transience of your income.

I assume you're registered on the electoral roll at your current address etc?

The affordability calcualtors are as accurate as the information entered.

99.9% of my applications go through without any hiccups on that front, however I had one on Friday where the underwriter came back and reduced the loan amount by £1800. The reason being is that the client had a car on finance she did not tell me about and was not on her bank statements. The client was in a position to put the extra down so no problems but it is all down to you really.

The other thing is checking what the lender counts as a commitment - student loans, pension deductions are the 2 big ones clients do not think of in the main.

As for credit cards and mortgages - they are very different. One is secured so offers the lender that little bit of extra security on one hand, but on the other hand the loan is much more so opens them up to extra risk.

Its all about finding the right lender(s) for your circumstances.

If in doubt, speak to a broker.

Can't remember where I read this - lenders consider 5% of the total credit card balance as a monthly credit commitment. In your case it would be £350. Don't quote me on this though but perhaps brokers here can confirm/not.

How many lenders/which lenders count pension and student loan commitments as part of affordability? Most calculators I've used don't seem to show any difference when I put my student loan payments in but show around a 30-40k reduction when I put my monthly pension contributions as a fixed cost that I would be unwilling to stop.

I don't know what to think about the calculators. I did a few on different websites and got slightly different potential mortgages, but when I went to see our mortgage broker she advised that we had a lot more we could potentially borrow.

I don't know if I was just being particularly overly critical in my calculations...!

Does this apply to loans as well? How much would a loan of £9000 in my name and £7000 in my partner be likely to affect the amount they would lend us? On mortgage calculators they say they will lend us around 250k with our income and all loan payments and outgoings included on there but when they see the actually amount on the loans how much will they take off this? Any advice appreciated! Thanks x

That would depend on the monthly payments.

Cards don't have a set monthly payment, so lenders typically take 5% of the balance. It's clear with a loan what is being paid.

Enter the details into affordability calculators with and without the loan payments and you can see the impact of having loans.

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