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 Guide to Mortgages

What Size Mortgage?

Your Financial Status
The main factor which influences the size of mortgage you can take out is your gross income.

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.

Gearing
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.

Tips

  • 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.



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