From: "Tim" 
Newsgroups: uk.legal uk.finance
Subject: Re: exaggerating your income to get a mortgage
Date: Wed, 5 Nov 2003 17:46:34 +0000 (UTC)

> > "half_pint" wrote
> > > You have to remember you could loose your job the next day and that
> > > noone can guarantee their income over the next 25 years, indeed 25
weeks
> > > in most cases.
> >
> "Tim" wrote
> > If the worst does happen, and the borrower loses their job - then
> presumably
> > 3x income could be just as difficult to pay as 4-5x ...
> >
> > So, does the possibility of unemployment really suggest that multiples
> > should remain low at 3-3.5x ?  Rather than looking at the proportion of
> > income being spent on mortgage payments, which might show that 5x is
> > perfectly affordable at current low interest rates (with interest able
to
> be
> > fixed for a long time, eg 10 years)?
> >
>

"half_pint" wrote
> If for example  you pay 50% your income of income on mortgage
> payments at both 4% and 10% interest rates, I am pretty sure it will
> cost you much more in the long run at 4%, probably twice as much.
> I don't have the time to work out the exact figure (at the moment).

That may be true, but it is not the point!!!!

The chances of unemployment would mean that almost ANY multiple maybe "too
much".
But ignoring unemployment, the multiple can surely (safely) be higher when
interest rates are lower??

Just because :-
 (a)  it would effectively cost more in the long run (which doesn't affect
safety of payment); and
 (b)  the proportion of income being used-up would not fall as quickly
(which also doesn't affect safety of payment - remember, we are ignoring
unemployment),
... then that does not mean that someone who can afford to pay 50% of
income, CAN AFFORD to pay 50% of income!!  Either they can or they can't -
if they can, THEN THEY CAN!