How much could we potentially borrow?
Hello everyone, sorry for the long post. I have provided a bit of a background for more info.
We’re planning to sell our house and have been trying to work out what we could realistically borrow for our next purchase.
We’re planning to sell our current house and, after repaying the mortgage and covering all sale/purchase costs (EA, stamp duty on the next property, solicitors for selling and buying, mortgage penalty, and moving costs), we expect to have around £280k available as a deposit for our next home. Obviously, we are not FTB anymore.
Our combined PAYE income is approximately £79,100. We are both on Plan 2 student loans.
In addition, I receive an EU disability pension of about £700 per month (around £8,400 annually). Due to the tax treaty between my home country and the UK, this pension is taxable only in my home country, however pensions are not taxed there, so effectively it is tax-free at the moment. I’ve confirmed this with two companies specializing in international tax treaties and with the HMRC as well. Since I’m PAYE in the UK and do not complete Self Assessment, I have been told that there is no requirement for me to declare this income in the UK.
We have no debts, loans, credit cards, missed payments, defaults, or CCJs. I’ve checked both of our credit reports and everything is clean. Also, both of are British nationals as well.
Ideally, we are looking at properties around the £700k mark. Based on online affordability calculators, lenders such as Halifax, Lloyds Bank, NatWest, and Santander UK appear to offer borrowing up to around 5x–5.5x income in some cases.
I understand that may be stretching affordability somewhat, but we are only slightly short if borrowing is capped at 4.75x income. So I’m trying to understand:
- Are there lenders that commonly offer 5x or x5.5 income multiples in cases like ours?
- What conditions usually apply for higher income multiples (for example lower LTV, higher salaries, specific professions, etc.)? My partner is a key worker if that is relevant
- Would any lenders potentially take my EU pension into account as additional income, given it’s regular and ongoing and therefore increasing the income for borrowing purposes (I would be able to supply all paperwork from the said country and get it verified, however I would not be able to show the self-assessments due to not being chargeable income in the UK) ?
- How much do Plan 2 student loans typically affect affordability calculations?
As another option, both of our families have offered to cover all purchase/sale-related fees, which would save us roughly £40k and allow us to increase our deposit to bridge the gap,
Sorry for the long post.... I’m finding it quite difficult to understand how lenders decide when they offer higher multiples and what factors make the biggest difference. Any advice would be appreciated.