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How much can I borrow? All lenders base the amount they will lend you on your income. Most apply a set salary multiple to your earnings, so if you find out what the multiple is you work out the maximum loan. The vast majority of lenders offer lone borrowers a mortgage of around 3.5 times their salary. Joint borrowers can choose to take 3.5 times the first salary plus the second salary, or 2.75 times their combined salary. Which you choose depends on how much you earn. For a couple earning £25,000 and £28,000 adding the salaries together and multiplying the total will work out better. For a couple earning £40,000 and £13,000, multiplying the larger salary by 3.5 and adding the second will be a better option. If this isn't going to be enough, you may be able to get an enhanced income multiple. Some lenders are willing to offer up to four times salary in cases where borrowers are able to afford the repayments. How much can I afford for mortgage ? Before looking for a home, it is sensible to calculate your budget. The mortgages available will largely depend on your income described above. To set the top price you can afford to pay for a home, add on the cash you have available for a deposit. The size of the loan expressed as the percentage of the purchase price or valuation of the home is called the Loan To Value (LTV). If you have no deposit you will needo to look at a 100% mortgages. However, you cannot use all of your spare money as a deposit. You will need to take into account all the additional upfront costs involved in purchasing a property. The legal aspects of purchase cannot be ignored - stamp duty kicks in at 1% of the purchase price on properties costing more than £60,000 to £250,000. Properties costing more than £250,000 and up to £500,000 are charged 3% stamp duty, while properties costing more than £500,000 are charged 4%. And you'll have to pay solicitors fees. You may have to pay an application fee for a special mortgage deal plus, perhaps, an arrangement or completion fee when you finally take the loan. And watch out for Mortgage Indemnity Guarantee (MIG) charges - a form of insurance that protects the lender, but is paid for by the borrower. If there is a charge for this, it may be added to the loan, or could be payable over the early years of the loan. And don't forget to budget for valuation and survey fees. Finally, it is worth finding out what refunds or cashback lump sums are available from the lender and look out for lenders who keep fees to a minimum. NEXT - mortgage payback rates Mortgages explained | About mortgage types | repayment mortgage | endowment mortgage | interest only mortgages | how much can I borrow ? | mortgage payback rates | variable rate mortgages | fixed rate mortgages | capped rate mortgages | discounted rate loans | remortgages | first time buyers | buy to let mortgage | commercial mortgages | mortgage costs | glossary of terms | mortgage FAQ's | |
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