Affordability continues to be a key issue for brokers when it comes to successfully placing cases. Earlier this year, research platform, MBT, published research that found more than three quarters (76%) of brokers say they work with clients they believe should be able to get a mortgage, but whom they cannot currently place with any lender on the basis of affordability.
As specialist lenders take a more hands-on approach to income assessment, they can often consider more of a client’s income than the automated calculation provided by a mainstream lender.
At Brightstar, for example, we work with lenders that can go over the standard 4.5 x income multiple, and there are numerous ways the specialist market can help to stretch your client’s affordability. Here are some to consider:
Whereas many mainstream lenders will ask for two- or three-years’ accounts to demonstrate income, we work with lenders that can base their affordability calculations on the most recent year’s figures. This is particularly useful at the moment when you consider that so many businesses suffered a drop in income during Covid.
We work with lenders that use net profit plus salary, rather than just dividend plus salary which usually works out more. We even work with one lender that will use operating profit plus salary, which is generally more than net profit plus salary, so this helps to achieve a higher loan amount.
Many lenders are able to base affordability on the daily rate earned by a contractor x48 weeks in the year. This can provide contractors with considerably greater affordability than some of the more traditional methods of assessing their affordability.
Regular Bonus or Overtime
There are lenders that can consider up to 100% regular bonus or overtime as part of their affordability calculations. Similarly, there are also lenders that are more considerate of maintenance and benefits payments, which can help to demonstrate a borrower’s true income.
In addition to these, a hands-on approach to underwriting also means that specialist lenders can often better consider an applicant’s income into retirement, as long as they are paying into a pension and the case makes sense on its own merits.
So, if you have clients who are looking to maximise their affordability and increase their options, pick up the phone and speak to our team at Brightstar. We have a range of lenders that can help your clients achieve the loan they need.