What Size Mortgage?
Your Financial Status
The main factor which influences the size of mortgage you can take out is your gross income.
Lenders will usually offer anywhere between 2 to 3.5 time your basic salary. For example, someone earning £15,000 annually could borrow approximately £45,000. A person earning £34,000 could take out a mortgage of around £100,000. For married couples, mortgage lenders may offer up to 2.25% of their joint income. Be prepared to show evidence of your salary. Employees should show their last three payslips. If self-employed, you will have to provide a letter from your accountant, and possibly three years of audited figures.
Often people may borrow a percentage of the total value of the house. For example, if you were to buy a house for £100,000 and took out a mortgage of £80,000 (80% of the house's value), your gearing would be 80%. The remaining 20% would then be paid using savings or security. In general, banks and building societies are likely to only lend up to 90% of the property's value. Some special 100% mortgages are available, but expect higher than average interest rates.
- Never borrow more than you need.
- Commission and overtime are not usually considered as 'gross income' by the lender.
- Your relationship and history with a potential lender can make a difference.
Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.