No Proven Repayment Capacity? No Mortgage

92% mortgages are now the norm for First Time Buyers with many getting a helping hand from the folks. However getting your hands on the 8% deposit is not the only barrier to getting onto the property ladder. Prospective First Time Buyers are slowly but surely becoming more familiar with the phrase "proven repayment capacity."

In order to get a mortgage nowadays you need to have a steady income and access to at least an 8% deposit but now more and more risk adverse mortgage lenders also want to see a proven repayment capacity.

What is a capacity to repay? and how do I prove that I can pay?

Mortgage lenders will look for a combination of one or more the following to show that you are a good candidate for a mortgage approval.

1/ If you are renting a property then this in itself is proof that you can pay a mortgage. You will need to pay your rent through your bank account by standing order if possible. If you can show your rent being taken from your current account for at least six consecutive months prior to seeking a mortgage you are well on your way to proving repayment capacity.

2/ If you are living at home with the folks rent free then you will need to show that you can save at least an amount equal or more to the monthly repayment of the mortgage you require. Again six consecutive monthly amounts into a savings account will suffice as repayment capacity.

3/ If you have loans or credit cards then getting a mortgage will be a bit harder as the monthly repayments will be taken off your qualifying income. However if you use the six months before applying for a mortgage to reduce or clear your debts then this is another way to prove repayment capacity.

With the advent of the credit crunch mortgage lenders want to make sure that you not only qualify for the mortgage but also have a proven track record or capacity to repay.

Whether we like it or not we are now back to the position my father was in when he got his first mortgage. Don't expect any favours from your local bank manager. Get yourself into a position where you can show your repayment capacity. Seek advice from a good Independent Mortgage Broker.