If you want to purchase a home, the first thing you will ask is “Can I afford it?”. We believe that getting on the property ladder can be a good idea. However, you must have the right financial situation.
The amount you can borrow from a mortgage lender will depend on your income, debt levels and fixed outgoings, such as child-care.
Different banks will offer different amounts. You can get up to five times your annual income from banks, but this is a maximum figure. If you have substantial debt that you are repaying, the bank will likely offer you less.
Check out our calculators to find out how much you can afford and how much the mortgage will be.
A deposit is also required, which is essentially a down payment for the house.
You’ll usually need to deposit at least 10% of the property’s value. Some mortgages will require you to deposit more. The deposit you make can limit the amount you can borrow.
The new Mortgage Guarantee Scheme was introduced by the government. It allows you to obtain a mortgage with a minimum of 5% deposit. The 95% mortgage program will be in effect for 18 months, and ends December 2022. The scheme is available to both new and existing homeowners. It covers all properties, old and new, that cost less than PS600,000. It is necessary to have regular income and a high credit score. You also need to prove that you can afford monthly mortgage payments.
– Depositors can get money from many places.
– Current home being sold
“Bank of Mum and Dad” and “Bank of Grandma and Grandpa”. See our guide to help parents support their children’s purchases
If your family members or parents act as guarantors on your loan, you might not need to put together so much. They can either insure the mortgage of their child against their earnings or against a portion of their house. They are responsible for the entire loan if something goes wrong.
If you are eligible for parental assistance, some mortgage companies may be able to lend up to 95% of your home’s cost. However, they might want to charge you over your parent’s property.
For more information about deposit requirements, see First-time buyer mortgages or Mortgages made easy.
The amount of deposit you make will determine the interest rate.
There are two options: a fixed-rate or variable mortgage. The term of the mortgage will also affect your monthly payments. For more information on how the different types of mortgages affect your monthly mortgage payments, see our guide on mortgage types
It is a good rule of thumb to not spend more than 35% of your post-tax income on mortgage payments
You can still use the money you have to rent for mortgage repayments.
You don’t have to spend the entire amount on the house when deciding how much you can afford. You will need to budget for many other costs that could add up to 10% to your total bill.
Stamp duty is often the largest cost. Stamp duty is not required in England or Northern Ireland for properties less than PS500,000, unless it is your only property. From 1st July 2021 to 30th September 2021 no stamp duty will apply to the first PS250,000 in property value. Then it will return to PS125,000 starting on 1st Oct 2021. The first PS300,000.00 is exempt from stamp duty. The first PS300,000.00 is exempted in Scotland. In Wales, the stamp duty is not applicable up to PS250,000. Use our stamp duty calculator to determine how much stamp duty will be required.
You should also consider selling your home simultaneously.
Surveys and valuations, solicitor/conveyancing fee, Land Registry fees and removal costs.
Your credit score not only impacts whether you are approved for a mortgage, but also how much you will pay each month. It is important to improve your credit rating before applying for a mortgage. Learn how to improve credit before applying for a mortgage.
First-time buyers and people moving into new properties are the main beneficiaries of government assistance. You should always check to find out if you can get government assistance.