Mortgages

How Much Should I Borrow on a Mortgage?

When you are applying for a mortgage you may wonder how much to borrow or you might just borrow as much as you need or as much as you can. It is good idea though, to think about this carefully. This is because you need to get the amount right and it can make a big difference in the future too.

Consider the Cost of Property

Obviously, the cost of the property will determine how much you will need to borrow. There will be a maximum amount that a lender will be prepared to let you have as they will work this out according to your salary. However, you will also need to borrow enough to cover the cost of the property. It is good to have a look around to see what is available in the area that you are looking to buy and in the size that you want as well. You will then have an idea of how much you will need to borrow, but you will need account for a few other things. You might find that that type of property might go up in value by the time that you are able to buy one and so you may need to borrow a bit more. You also need to account for the fact that you will normally have to save up a deposit. This will be a percentage of the value of the home, so will not be able to borrow the full value but perhaps 90% or 95% and the rest will be covered by your deposit that you will need to save up.

Think About the Repayments

It is also extremely important to find out how much you are likely to have to repay each month. It is worth calculating how much you can afford and then matching this up. So, look at your bank statements and then see what money you have coming in and what you spend and you will be able to work out what will be left. If you pay rent at the moment then that is a chunk of money you could use for mortgage repayments so that will be a helpful start. It is important to make sure that you are happy that you will consistently be able to afford this amount of money as if you miss a payment or are late, there will charges which are expensive and no one wants to pay extra if they can avoid it.

Take the Cost of the Loan into Account

It is also worth thinking about the cost of the loan. Find out how much it will cost you – the lender should be able to tell you and think about whether you think that it offers good value for money. The cost will be dependent on the interest rate and this could change during the course of the loan, but you can still get a good idea of how much it might cost and therefore you can think about whether you feel that you want to pay that much money.

It is easy to just work out how much a lender will lend to you and apply to borrow that much money. However, it is important to also think about whether you will need that much for the property you want, whether you can afford to repay it and whether you are happy with the cost of the loan. The more you borrow, the dearer the loan and the higher the repayments. Therefore, you might want to consider borrowing less so that you have a cheaper and easier experience.

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