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Property and borrowing topics

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Frequently asked questions

Will borrowing less get me approved?

Borrowing less can turn an affordability decline into an acceptance, because a smaller loan lowers the payment the lender tests, but the lender still decides on its full assessment. A larger deposit and a cheaper property are the usual ways to borrow less. For example, if £181,000 is the most a lender's assessment supports and you asked for £220,000, £39,000 more deposit or a home costing £39,000 less would close the gap. Checking your maximum loan with the lenders that suit your income before you choose a property helps avoid a shortfall like this.

Does the 50% borrowing limit include existing loans?

Yes. Every loan the scheme still owes counts against the 50% limit, and the test is made each time new borrowing is taken. HMRC's example is a scheme with £200,000 of assets and a £50,000 loan: its net assets are £150,000, so its total borrowing can be £75,000 and it can borrow only £25,000 more. Replacing a loan without increasing it needs no new test, but unpaid interest added to a replacement loan counts as an increase. A later fall in the value of the scheme's assets does not by itself cause a breach.

Does borrowing to fund partnership capital affect my mortgage?

Yes. A personal loan taken to fund a partner's capital contribution is a credit commitment, and lenders take its payments into account in the affordability assessment. In our experience lenders lend up to 5 times income after commitments, so a £300 a month loan removes £3,600 a year of income and £18,000 of borrowing at that multiple. A partner discloses partnership loans and any personal guarantees of the firm's borrowing, and some lenders review the partnership's own liabilities, since partners in a general partnership are jointly liable for the firm's debts (legislation.gov.uk: Partnership Act 1890, section 9). A remortgage used to fund the capital is assessed on the partner's income in the usual way.

What is a property portfolio mortgage?

A property portfolio mortgage is a type of loan designed for investors with multiple properties, allowing them to finance all properties under one mortgage arrangement.

Can I get a mortgage for property in Alderney?

Yes, mortgages are available on property in Alderney, which is part of the Bailiwick of Guernsey, from lenders willing to lend across the Bailiwick. Alderney does not operate Guernsey's Local Market and Open Market split, so there are no equivalent occupation restrictions on Alderney homes.

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