Step 1: How much can I borrow?
The general rule is that you can borrow 3.5 times your annual salary or, if you're applying with a partner, 2.5 times your combined annual salary. Depending on your financial situation, though, you may find that mortgage providers will offer you more (or less), or that they will charge you a different interest rate.
Mortgage providers - banks and building societies - look at several things when you ask them for a loan. The first is your credit rating. If you've had credit problems in the past, many lenders will offer you a smaller loan or charge more interest. On the other hand, lenders like it if you have someone who can guarantee the loan - like a parent who promises to make the payments if you can't.
The size of your deposit is also important. If you're only asking the lender for 75% of the property's valuation, you'll be offered a lower interest rate than if you're borrowing 100%. But remember, you'll have to keep back some of the money you've saved to cover other costs like stamp duty, legal fees and removal costs. More about those later.
Most people's first mortgage is on a 25-year repayment plan. But you could choose to repay over 20 years, in which case your monthly payments will go up but the total amount you pay over the life of the mortgage will go down. The choice is yours, and it depends mostly on what you decide in step two.
The general rule is that you can borrow 3.5 times your annual salary or, if you're applying with a partner, 2.5 times your combined annual salary. Depending on your financial situation, though, you may find that mortgage providers will offer you more (or less), or that they will charge you a different interest rate.
Mortgage providers - banks and building societies - look at several things when you ask them for a loan. The first is your credit rating. If you've had credit problems in the past, many lenders will offer you a smaller loan or charge more interest. On the other hand, lenders like it if you have someone who can guarantee the loan - like a parent who promises to make the payments if you can't.
The size of your deposit is also important. If you're only asking the lender for 75% of the property's valuation, you'll be offered a lower interest rate than if you're borrowing 100%. But remember, you'll have to keep back some of the money you've saved to cover other costs like stamp duty, legal fees and removal costs. More about those later.
Most people's first mortgage is on a 25-year repayment plan. But you could choose to repay over 20 years, in which case your monthly payments will go up but the total amount you pay over the life of the mortgage will go down. The choice is yours, and it depends mostly on what you decide in step two.
Terms and Conditions - Privacy Statement - © Copyright 2007 ESPC UK Ltd
