Mortgage Capacity Assessments can be used to explore a range of financial scenarios and provide an accurate, realistic and educated outlook of future mortgage capacity. There are many different ways in which changes to financial circumstances can affect an individual’s ability to obtain a mortgage. The following scenario considers the effect the location of employment may have on mortgage borrowing:

In this scenario my client wanted to explore how the following changes to their circumstances may affect their future borrowing capacity:

  1. Buying a property close to their family and commuting to their place of work, 100 miles each week. In this case the client would require rental accommodation during the working week.                                            
  2. Buying a property close to family and seeking new employment closer to home which would result in a substantial reduction in salary.

I was surprised to learn that mortgage lenders were highly concerned with the clients outgoings based on the commute scenario and mortgage capacity was actually higher should the client seek new employment and suffer reduced pay, despite a significant drop in income of approximately £20,000.00 per annum. The costs related to the commute scenario, which included travel expenses, rent, utilities and food were approximately £1,000.00 per month. Compare this to a reduction in income of £1,666.00 per month gross (based on a £20,000.00 reduction in pay) and it could be argued that the client may actually be better off commuting and taking the higher paid job. However, from a mortgage lenders perspective the commute scenario resulted in higher outgoings and higher outgoings present a greater chance for the applicant falling into financial difficulty.

There is a lot more to consider then just income when calculating mortgage borrowing and research is important. Haven’t got time to do your own research? Are you divorcing and require details of your mortgage capacity? Then please contact us for further guidance.