Why Your Children Affect The Amount of Mortgage You’ll Get

If you are looking to remortgage or move home and you have children, you are likely to find that your borrowing potential is restricted.  That’s the conclusion of recent research by the Daily Mail, with many experts warning that having children can significantly affect the size of the mortgage that you’ll get.

Despite earning the same salary, couples with no children can often borrow up to 50 per cent more than families, the report found.

Research finds that couples with children can borrow less

The research by the Daily Mail looked at the maximum mortgage borrowing potential of a couple who both earned Britain’s average salary of £25,000.

Lender ING Direct would lend £200,000 to the couple if they had no children, but the mortgage amount would fall to £158,715 if they had three children.

Most mortgage lenders have the same affordability criteria and reduce the size of mortgages available to applicants with children.  The newspaper found that Santander would lend £237,625 to a couple with no children and a good credit score but only £219,485 if they have two children.

Similarly, Nationwide would agree a mortgage of £225,000 to the childless couple, but only £217,100 to a couple with three children.

And, couples who earn a lower amount would be more seriously affected.  The Daily Mail found that ING Direct would agree a mortgage of £160,000 to a childless couple who each earned £20,000 but only £77,000 if they have three children.

Affordability calculations take spending on children into account

Lenders argue that they have to take children into account when considering mortgage affordability because of the extra expense that parents have for children’s clothes, education and activities.  However, many experts counter this argument by claiming that parents are less likely to spend a considerable sum on foreign holidays or socialising.

Melanie Bien from Private Finance said: “Couples with children are being penalised by mortgage lenders.  The rationale is that they have higher outgoings, so can’t afford as big a mortgage, but this seems unfair when their social lives will be more limited and therefore cost less.”

David Hollingworth from mortgage broker London and Country said: “If you’ve got children, you have got less money.  Lenders are putting ever closer scrutiny on what your expenditure is and children will come into play.

“If you have got children, the chances are you will be lent a smaller mortgage.”

A Nationwide spokesman told the newspaper: “The amount we lend will vary with each customer’s circumstances. Families with children tend to have different expenditure levels to those without.”

So, if you have started a family since you last took out a mortgage, you may now find that you can borrow less than you expected.  It is advisable to speak to a mortgage broker or financial advisor to determine exactly how your children will affect the amount you can borrow.

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