How much mortgage can I afford? Check here
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For many people, their journey on the property ladder starts with saving up enough money to use as a deposit on a home. Prospective homeowners then have to apply for a mortgage, which is a loan taken out to buy property or land.
How much deposit do you need for a home?
Most prospective homeowners are encouraged to save between five and 20 percent of the cost of the property as a deposit.
However, better mortgage rates are available for people who save up deposits more than five percent.
There is new Government support available which can help people with lower deposits to buy their first homes.
Where can you apply for a mortgage?
Banks and building societies offer a range of different mortgages.
However, with so many options to choose from, some might consider seeking expert advice when picking a mortgage.
Mortgage brokers or independent financial advisers can help prospective homeowners to find the best mortgage deals on the market.
How much mortgage can I afford?
A number of factors are taken into account by lenders when deciding whether to grant someone’s application for a mortgage.
How much someone can afford to borrow will differ from person to person, depending on their income and personal circumstances.
Generally, the maximum lenders may let someone borrow is around 4.5 times the applicant’s income.
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The Money Advice Service explains: “In the past, mortgage lenders based the amount you could borrow mainly on a multiple of your income. This is known as the loan-to-income ratio.
“For example, if your annual income was £50,000, you might have been able to borrow three to five times this amount, giving you a mortgage of up to £250,000.
“Now, when you apply for a mortgage, the lender will cap the loan-to-income ratio at four-and-a-half times your income.”
Lenders carry out thorough assessments on people applying for a mortgage, to see if they will be able to afford the repayments every month.
How can you check how much you may be able to borrow?
The Money Advice Service includes a mortgage affordability calculator on their website HERE.
Using the site’s tool, people are able to estimate how much they can afford to borrow to buy a home.
Details such as income and monthly outgoings are needed for the estimate.
There are other mortgage calculators available, with many mortgage lenders offering similar calculators on their websites.
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