Mortgage lenders will take into account your debt-to-income ratio (DTI) as a way to assess your eligibility. Generally, it is recommended to keep your DTI ratio below 36%, with 43% being the highest DTI ratio a borrower can have and still qualify for a mortgage. Ideally, lenders prefer a debt-to-income ratio of less than 36%, with no more than 28% of that debt going towards paying a mortgage or rent. The maximum DTI ratio varies from lender to lender.
However, the lower the debt-to-income ratio, the higher the chances that the borrower will be approved or at least considered for the credit application. To apply for a Help to Buy mortgage, your DTI ratio cannot exceed 45%. Lenders will usually consider your purchase-to-rent mortgage application on an individual basis and will thoroughly analyze your finances to make sure you can cover your monthly payments. Most lenders will look at your request favorably.
A high debt-to-income ratio can have a major impact on your ability to get a mortgage. Lenders tend to prefer borrowers with lower DTI ratios, as this suggests that they are more likely to be able to make their payments on time and in full. A high DTI ratio may indicate that you have too much debt relative to your income and could make it difficult for you to qualify for a loan. If you have remortgaged to free up capital and decide to move out of your house, you can transfer your mortgage (take it with you to your new home) or apply for a new mortgage.
Remortgaging to free up capital could be a way to access extra money, perhaps to renovate a home, pay off short-term debts, or help with your children's education. This also applies to any remortgage or mortgage loan secured against your property, including equity release products. You can free up the capital in your home to deposit a deposit on another property, but you'll generally need significant capital to do so. Equity is related to the loan-to-value ratio (LTV), which is the difference between the mortgage that remains to be paid and the value of the property.
