Home > Affording a Mortgage > Affordability Calculators

Affordability Calculators

By: Christine Whitfield BA (hons) - Updated: 16 Sep 2012 | comments*Discuss
 
Affordable Affordability Calculators

In recent years a big change has taken place in the mortgage market that has made how we borrow money, and more importantly how lenders lend money, more innovative than ever before. And this change has been brought about by a new system many lenders across the UK – affordability calculators.

Affordable housing is severely lacking in the UK and potential home owners are unable to go for the higher priced housing because they cannot take out a mortgage to afford it. Often this is a good thing – taking out a mortgage you cannot afford to repay will lead to nothing but problems for the home owner. However in some cases the borrower can afford to repay the mortgage but the traditional form of lending i.e. income multiples prevents them from borrowing the amount they can feasibly pay back.

In other instances a borrower may receive a mortgage based on income multiples which theoretically he or she should be able to repay but when the total outgoings are added up it becomes clear the mortgage is going to be a struggle.

That’s where affordability calculators fit in.

What is an Affordability Calculator?

Many lenders in the UK use affordability calculators. The lenders tend to include the calculator on their websites. Users input their salary, other incomings and all outgoing and produces the figure they could potentially borrow. The difference between the affordability calculator and the traditional method of lending is the amount a lender will lend is much more flexible and depends upon the borrowers personal circumstances. This flexible way of lending is much more adaptable than the traditional method of income multiple lending.

What has Been Said about Affordability Calculators?

Affordability calculators have been praised for bringing more flexibility to the mortgage market. Mortgages and properties, away from the business element, are an extremely personal issue. One size most certainly does not fit all. Supporters of affordability calculators claim affordability calculators have brought mortgages to the 21st century where everybody’s situation is different.

However something occurred in the mortgage market last year which made everyone a little more cautious about lending. In the US many sub-prime lenders – lenders who lend to borrowers who don’t have a good credit history – gave mortgages to a number of borrowers who couldn’t afford to repay it. And so began a global credit crunch. Lenders here in the UK became more careful about the amount they borrowed and suddenly the traditional method of lending – usually three and a half times the persons income – became much more sensible.

That is not to say that affordability calculators became redundant. Indeed they still play a very important role in the mortgage market, not least because they calculate outgoings and incoming and give a more accurate picture of a borrowers true affordability.

Affordability calculators are a useful tool and, for a potential homebuyer in today’s market, could mean the different between getting the mortgage needed to purchase a house and missing out on getting on the property ladder.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Kezzah01
    Re: The Right to Acquire Scheme
    i am currently looking into the right to acquire for our property from guinness partnership. up to now they have said our property…
    22 August 2019
  • Stephanie
    Re: Are You Classed as a Key Worker?
    I am a teacher working for a training provider delivering apprenticeships in health and social care. I also provide essential…
    5 August 2019
  • Niss
    Re: Buying Your Council House
    How long do I have to live in my council house after getting a mortgage before I can rent it out.
    28 July 2019
  • Pecks
    Re: The Right to Acquire Scheme
    I would like to buy home but its unclear the housing association built or bought thing its stillcouncil in my eyes just a limited…
    28 July 2019
  • Tazz
    Re: The Right to Acquire Scheme
    While under raglan I was told I could buy my flat but I was at risk of being made redundant so I didn’t go for buying my flat now…
    26 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Moses97
    Re: The Right to Buy Scheme
    Hi Everybody, Hope everyone is well. Needed a bit of guidance for the following situation: My parent have been tenants with the…
    18 July 2019
  • Holly
    Re: The Right to Buy Scheme
    Hello can some one help me plzs my partner as lived with he's mum and dad for many years about 25 to 30 years and his parents have lived…
    17 July 2019
  • Holly
    Re: Buying Your Council House
    Hello could some one help me my partner as lived with he's mum and dad most of he's life but he had to move out do to a family member…
    17 July 2019