How come for a single it is usually 3.5 times salary but for a couple it is
2.5 times joint salary. Surely if it is a joint mortgage then there is less risk since if one person loses their job then the other person can make payments so shouldnt the maximum amount be more. Whereas a single person is a lot more risky. Wouldnt a couple be better of applying for mortgages seperately and buying 2 halves of a shared ownership property?"Mr Bean" wrote
If the borrowers are close to their maximum budget (which being close to the maximum mortgage multiple ought to imply) then losing *either* income may mean that they cannot afford their total outgoings - eg they wouldn't go without food just so they could make the mortgage payments!!
"Mr Bean" wrote
The chances of two people both keeping their job is *less* than the chances of one person keeping their job.
For instance, suppose one-in-ten people lose their job over a particular time period. Chances of a single person keeping their job = 9in10 or 90%.
Chances of both people in a couple losing their job = 1in100 or 1%. Chances of person A losing their job but person B keeping theirs = 9in100 or
9%. Chances of person A keeping their job but person B losing theirs = 9in100 or 9%. Chances of both people in a couple keeping their job = 81in100 or 81%.Ie 90% of single people would keep their job but only 81% of couples would (both) keep their jobs!
"Mr Bean" wrote
Interesting idea. Try it!
It isn't. Couples applying jointly typically have the option to choose between either 2.5 times joint or 3.25 times higher plus 1 times lower, or similar figures. And if the lower income is too low, the option usually remains of going for 3.5 times higher and ignoring lower, by simply not applying jointly.
For any given joint income, the method to choose, if you want to maximise the amount you can borrow, depends on what proportion of the joint income is accounted for by the lower of the two. It is:
3.5 x higher if the lower income is less than 1/5 of joint income, 3.25 x higher + lower if the lower income is between 1/5 and 1/3 of joint, 2.5 x (higher + lower) if the lower income is between 1/3 and 1/2 of joint.Lower cannot, of course, be more than 1/2 of joint.
In message , Mr Bean writes
Im not sure what you mean by 'better', or 'shared ownership'.
What do you mean?
Also I cant think of a lender who would lend in the circumstances I think you describe, can you expand?
Well I mean that both people could apply for seperate mortgages of say 4.2 x salary such as abbey national do and then each buy half of the property. This would allow them to spend more than getting 2.5 x joint salary.
But no lender would allow you to do this......
A mortgage normally entails having a first charge on the property, and you can't have two separate loans which both have a first charge ...
In message , Mr Bean writes
I cant see e lender going for that. What happens if of one defaults
"Stephen Burke" wrote
I suppose OP is looking at it as two, in a way separate, halves of a house.
One half will be owned by person A with a mortgage loan & first charge (on that half).
The other half will be owned by person B with another mortgage loan & another first charge (as there is no other "first charge" on that particular half-house).
Is this possible??
To the extent that you can repossess half a house ...
Tim secured a place in history by writing:
No
Technically possible, but I cant think of a lender who would do it on the grounds of the value of half a house being 'nil' without the other half.
Tell that to the divorce courts.
I have! Didnt get anywhere though..............
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