In the current market place more and more lenders are moving their lending criteria to affordability based model rather than an income multiple based lending model.
Today Leeds Buildings Society announced it was also moving to the affordability model as of the 15th April 2012. All applications up until the 13th April will still be based on the old lending criteria of income multiples. Leeds new system will take into account the applicants basic pay, any bonuses that are payable and any other income that is generated (although not all income sources are accepted in the Leeds current lending criteria).
As of today and based on a whole of market mortgage offering from The Mortgage Broker there were only 3 mortgage lenders offering an income multiple to work out what the maximum lending amount would be – These lenders are Leeds, Clydesdale Bank and Coventry Building Society.
The pros and cons of affordability based lending models are:
- Generally higher lending amounts on higher salaries
- Generally higher loan amounts when low or zero existing credit commitments
- Higher loan amounts with less dependants.
- Lower loan amounts when compared to income multiple methods on lower salaries
- Lower loan amounts with more dependents when compared to income multiple methods
- Lower loan amounts when more financial dependents.