Affordability can be a very subjective thing, what one person feels is affordable another may not. This in turn can present a problem for lenders in so much as how they assess one persons ability to afford a mortgage against someone else's ability to afford the same loan.



The one way that mortgage lenders have of getting around this problem is to devise their own system of affordability. This is not as daunting as it may first sound because each mortgage lender may have their own criteria and with that in mind it pays to see what is on offer from the individual mortgage lenders and what would suit you.

Some lenders say they will lend you 3 times your salary minus any other financial commitments. Therefore if, for example, you earn 30,000 per year and each month you pay a car loan of 300. By multiplying that 300 by 12, you can see that you pay out 3600 per year for your car. Take this off 30,000 and you are left with 26,400 which your mortgage lender will consider as your annual worth. According to their lending criteria, they will therefore lend you this amount multiplied by 3 which will give you a mortgage of 79,200.

Now don't worry if your income is this and you now don't think you can get a decent mortgage because as I said all lenders are different. For example 3 times is actually probably the smallest amount that most lenders will lend nowadays. A lot of lenders routinely lend in excess of 4 times income and some even lend over 5 times income. Some lenders as in the example above deduct loans and credit cards other lenders ignore them completely. So it is important to do research to find the lender that has a lending policy that fits your circumstances perfectly.

Some lenders assess affordability totally differently and don't use multiplication methods at all. These companies use your salary and calculate the amount they will lend as a percentage. As an example, if your income is 30,000 per annum and they will allow you 40% per month of a loan, but you still have a 3600 annual car loan- 40% of 30,000 is 12,000, less the car loan leaves 8,400. Based on these lenders criteria, they estimate that you can afford to repay 8,400 per annum, or 700 per month. They wil therfore lend to you providing your new mortgage costs no more than 700 per month.

Whilst no one can really tell how much a person can really afford these types of calculations are laid down to ensure there is a certain degree of responsible lending taking place. All lenders have to demonstrate to their regulators that they have not lent money irresponsibly.

Also it should be taken into acount that although you may feel that you can afford to borrow a certain amount in your present circumstances, factors such as future fluctuations in interest rates may not see you financially as secure later on down the line. Not only are these policies protecting the lenders, they could invariably be protecting yourself as well.

So when getting a mortgage it is always advisable to check your own affordability and make sure that any mortgage you arrange now is also affordable after a few percentage point rises come in. So if they haven't already done it ask your mortgage adviser to quote you the same mortgage with a three percent rate increase in it and see how affordable it is then, if you find it still affordable then you should be safe to proceed.