Mortgage loan


You saw this house for sale over the weekend and you just have to buy it! Your wife is ecstatic, you are excited and the kids are already in love with it and with the neighbors. In any case its time to move out of your rental with its grumpy owner. Where do you go from here? First of all, buying a house or flat is an expensive business, so it's a good idea to work out whether you can afford to borrow enough to get on the local property ladder in the first place. And then there’s the whole question of a mortgage loan. How much can you get? Generally speaking, a mortgage lender will lend you between three and four times your gross salary, although some lenders will offer you more if you're willing to pay a higher interest rate. If you're buying with a partner then they'll probably throw in the equivalent of his or her annual salary in addition to the amount they're prepared to lend you. So, if you're on £25,000 a year and he or she is on £20,000, you should be able to borrow around £120,000. Alternatively, they may lend you three times your joint income. This usually means you can raise a slightly bigger mortgage loan. Using the same salary figures, you could borrow £135,000 on this basis. If you get any additional income from bonuses or commission these may be taken into account as well. The next thing to think about is the deposit you'll need to buy the house. Usually a mortgage lender will loan you up to 95% of the value of the property which means you'll have to come with the rest. If you want to buy a house worth £100,000, you'll need a deposit of £5,000 and so on. Do you have any savings that you can use? Can you raise the money by other means, if you haven't? Can your parents help? There are certainly lenders who will give you a 100% mortgage loan but you're likely to pay over the odds on the interest rate because you'd clearly be a bigger risk. After all, if you default on the mortgage, they'll want to be sure that they can get their money back in full. Remember, the larger the deposit you put down, the lower the rate of interest you are likely to get.



Mortgage loan