Maximum Borrowing

Whether you are a first time borrower or re-mortgaging a home, it is important that you maintain realistic borrowing expectations. When calculating your maximum borrowing amount, you have to consider whether or not you can afford the repayments. You need to be aware of the various factors that determines how much you can borrow.

Borrowing Amount

The exact amount you can borrow will depend on your individual circumstances. The main factors to consider include your salary, whether you put down a deposit, size of the deposit, credit history, and the Bank of England interest base-rate. The best provider for you is the one who can offer the best personal or secured loan for your circumstances. The lender will obtain a credit check that involves calculating your credit rating. This shows lenders how risky it will be to give you a personal loan. A good credit history can help you obtain better terms, conditions, and interest rate.

Maximum Qualifying Amount for a Mortgage

Mortgage lenders will look at your income, overtime, commission, bonuses, and any additional income. If you are self-employed, the amount you can borrow is based on your business accounts. It will be calculated using your net taxable income. Most lenders require at least two years of accounts to assess your net income. If this is not available, a self certified mortgage may be a better option. The amount you can borrow will also depend whether you want to buy the property on your own or with someone else. Many lenders offer maximum borrowing amounts based on an income multiplier. Values are normally set between 2.5 and 5. The joint income of a couple can also be used for borrowing, with a separate multiplier for joint incomes. The cost of your mortgage will also depend on the mortgage term, life insurance, and income protection insurance. As well, lenders will calculate repayments in a variety of ways such as daily, monthly, or yearly. However, for an accurate calculation, the APR figure must be used.

Total Cost of a Mortgage

The total cost of a mortgage is the result of interest repayments, total capital borrowing, and any management fees charged by the mortgage lender. Interest payments can be estimated using a mortgage calculator. You will have to ask your lender about management fees. The total cost of a mortgage will increase the longer the repayment period and the amount borrowed. A larger deposit or early overpayments can significantly decrease the overall cost of a mortgage. Fees vary depending on the mortgage lender. Some common fees include:

1. Early Repayment Charge – If a mortgage is repaid before a specified period.
2. Final Repayment Charge – A fee applied on the last payment before the mortgage is completely repaid.

Considerations

Always borrow responsibly. Never borrow beyond your means and always read the fine print of an agreement. Make sure that you factor in all possible expenses with a mortgage before signing the contract. Your home may be repossessed if you do not keep up with the mortgage repayments.