Assessing affordability to lend outside income multiples – Case Study

23 September 2021

By Tim Vigeon, Head of Lending at Buckinghamshire Building Society.

In order to determine how much we will lend at the Buckinghamshire Building Society, we base the amount that we will lend on a manual affordability calculation rather than strict income multiples.

This allows our underwriters to use their expertise to assess net income against outgoings (including stressed mortgage payment) to agree the amount that we lend. By using this method, it often means that we can lend outside income multiples which many lenders use to determine the maximum loan amount.

The following is an example of how this works.

Scenario:

Purchase price: £440,000
Advance required: £396,000
LTV: 90%

Mrs A: Salary: £45,780
Mr A: Salary: £31,590
Total: £77,370

Using 4 times joint income = £309,480. Initially the case appeared to be a decline based on the income multiples calculation, and a stretch to get to achieve the lending required.

However, a manual affordability assessment using the net pay plus the known and estimated outgoings showed that the stressed mortgage payment was affordable, and therefore the Society was happy to approve their application at 5.12 joint income. The applicants were overjoyed and have now moved into their dream home.

At Buckinghamshire Building Society we pride ourselves on our ability to “think outside the box” and come up with solutions to help people to buy their own home. Our underwriters are empowered to make lending decisions without the need for a referral to credit committee for loans up to £500,000.

For further information regarding our products or if you wish to discuss a case with us then please visit our website for further information – www.bucksbs.co.uk/intermediaries