Can You Afford a Mortgage?
When looking for a property, one of the most important questions to ask is ‘How much can I afford?’
Very few people can buy their home outright and will therefore need to arrange a mortgage. Anyone over the age of 18 can apply and, typically, you’ll be able to borrow up to three or four times your annual salary, depending on the lender. If you are buying a property with a partner will be able to borrow more as you are sharing the liability. Add your deposit to this figure, take off your mortgage arrangement fees and stamp duty, and you’ll know the maximum you can offer on a property. It’s important to talk to a mortgage specialist to get a firm idea on what you can afford before making an offer on a property.
Here are a few tips for working out how much you can realistically afford on your mortgage:
- Along with your monthly mortgage repayments, you’ll have household bills and other expenses. Just because you can borrow a certain amount it doesn’t mean you can afford the repayments if you have other financial commitments but when you apply for a mortgage the affordability checks should make sure you aren’t overstretched.
- If you choose a variable rate on your mortgage, your monthly repayments could go up or down. Consider a fixed rate to ensure the same expenses each month.
- Think about your lifestyle and what would happen should your salary change. Will you be able to afford the repayments?
- Add up the other costs and expenses associated with owning your property, including utility bills and council tax.
Your Deposit
Gone are the days when you could get a 100% mortgage. Lenders today will typically offer a mortgage for 90% of the property – meaning you need to put down the other 10%. The more you can save, the better interest rates you’ll likely be entitled to. This can also help avoid negative equity – whereby the house is valued less than your mortgage.