A BEGINNER'S GUIDE TO 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
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
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.