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How much can I borrow for a Mortgage

How much can I borrow for a Mortgage

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Buying a home is one of the biggest life decisions you will ever make. It is the most expensive thing you will likely ever own. For many people, it’s a financial repayment that they are committing to for the next 15, 20, or even 30 years.

If you’re looking to get a long-term mortgage, it is essential that you make sure you can afford it. The question is how can you work out how much you can afford to borrow?

Assessing your personal circumstances

Getting a mortgage these days is different to how it used to be. The Financial Conduct Authority introduced changes in 2014 after thoroughly reviewing the mortgage sector.

There is now a cap on the amount you can borrow, set at four and a half times your annual salary. Lenders also have to make an assessment on how much you can realistically afford to repay each month by looking into your monthly expenses. This includes both living and personal expenses.

A stress test is also carried out, which basically looks at whether you would be able to afford the repayments if interest rates changed or if you were to be made redundant. If it is found that you likely won’t be able to make the repayments, you may be offered a lower mortgage.

These changes have made it more difficult to get a mortgage, though they do minimise the risk of getting into financial trouble later down the track.

The rate you are offered will depend entirely upon your personal situation.

Making use of mortgage calculators

How much can I borrow for a MortgageThe majority of lenders have a useful mortgage calculator on their site which lets you work out how much you can realistically borrow. After filling in a few short details, including a list of your incomings and outgoings, the calculator will let you know how much you can comfortably expect to repay each month.

It is worth noting that while these calculators do give you a rough idea of how much you might have to pay, they aren’t guaranteed. Remember that the rates are dependent upon your circumstances so you could end up with a higher quote than you are presented with.

Looking at comparison websites

Another way to work out what you can afford is to look at comparison websites. These are great at saving you time as they compare hundreds of different lenders in a matter of minutes.

You type in a few personal details and the website brings up a list of matching lenders. Again, this is only a rough idea of the lenders you might be best suited to. It is important to look through their lending criteria before applying to see if you are eligible.

It can be hard working out exactly how much you can afford, and while online calculators and comparison websites can help, it isn’t until you actually contact a lender that you know exactly what the mortgage rate will be.



About Jenny Smith

About Jenny Smith

Jenny Smith is a freelance writer and facilitator specialising in mental health, well-being and ecotherapy. She writes for National Mind and The Working Parent and facilitates training in the Work that Reconnects and Ecotherapy. She is inspired by nature, gardening, love and non-duality teachings

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