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A BEGINNER'S GUIDE TO MORTGAGES

Mortgages have long been a popular topic in the media but it's hardly surprising we're all so obsessed given that the property market is something that effects almost everyone. Whether we're already homeowners or are contemplating our fist tentative step onto the property ladder the state of the property market is something that affects all of us.

Despite all this press attention the simple concerns that may actually be relevant to anyone attempting to purchase a house often get overlooked and there are few more fundamental issues, particularly for first time buyers, than the simple question of how much you can realistically afford to pay: How big a mortgage can you reasonably stretch to?

Buying a home is inevitably going to be pricey, costly. It goes without saying then that the importance of getting it right is not something any of us should take too lightly, you should be ready to consider long and hard how far your budget will realistically stretch. The first factor in the equation is your salary: A typical mortgage will be for 3 or 4 times your salary. If you're buying with a partner then mortgage companies will probably add their salary on top of what they are willing to lend you. So, say for instance you're on $60,000 you can expect to borrow $240,000, if you're partner is earning $40,000 you could be looking at $280,000. An alternative deal may simply be a calculation of three times your combined salaries - in this case that would make $300,000, a slightly larger loan.

Mortgage companies could be prepared to give you a larger mortgage if, as is increasingly the case, they factor in your financial track record in addition to simple salary multiples. This would involve a lender assessing at your statements and outgoings and using this as an element in their calculations. Lenders with a good track record therefore stand a better chance of being given a more generous mortgage than might otherwise have been the case. Conversely, borrowers with a less impressive credit history could be offered less.

Don't simply assume that once you've established how much you're going to borrow and how much you can manage to pay on the deposit (remember that the more you manage to put down as a deposit the lower you're interest rates are likely to be - so it's worth scraping together any savings you can muster plus, if possible, a parental contribution) this is the end of you're spending. Unfortunately there are numerous extra costs to consider and budget for.

Aside from the numerous niggling extra costs such as valuation, survey and legal fees (at a rough estimate you should probably budget something like $3,000 for these) the largest single additional expense is likely to be stamp duty.

You would be well advised to do a bit of financial self-assessment, don't assume that because a lender is happy to offer you a substantial mortgage you can inevitably afford to pay it. Try to be as realistic as possible and take into consideration your monthly income and outgoings. Don't be over ambitious and tie yourself to a mortgage that it's an inconceivable struggle to afford - a dream home is not worth bankrupting yourself over. Take a look at one of our mortgage calculators. In addition you can save money and time by checking out a Mortgage comparison site and keeping up to date with the most competitive deals.



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