What size mortgage can I get?

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What size mortgage can I get?
Buying a house is likely to be the biggest purchase you make. (two old houses in chester england image by green308 from Fotolia.com)

With the average price of a house in the United Kingdom well above £200,000, at the time of publication, most prospective buyers will have to borrow money to become homeowners. Money you borrow to buy property is known as a mortgage and they’re available in a variety of forms. If you take out a repayment mortgage, you’ll pay off the full cost of the loan as well as any interest, while interest-only mortgages only pay the interest on the loan and you’re expected to pay off any remaining balance at the end of the mortgage.

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Factors For Lenders

A mortgage company will take three main factors into account when deciding how much it will lend you. Your incomings and outgoings tell the lender whether you can afford the repayments, your credit history helps him decide the level of risk involved in lending to you, while the valuation of the property ensures the company does not lend you more than the property is worth. This is an important factor for lenders, since they have the right to sell your house to pay off the loan if you default on your mortgage payments.

Factors For Borrowers

Your deposit is a major factor in deciding how much money you’ll be able to borrow. Many mortgage lenders require new borrowers to have a sizeable deposit – the average British deposit increased from £6,793 in 1990 to £65,924 in 2011. No matter how much you borrow, the main factor for you is being able to afford to pay the loan back.

Additional Expenses

Bear in mind that your mortgage repayment is not the only charge you’ll receive each month. It’s a condition of most mortgages that you have sufficient buildings insurance cover, while you’ll also need insurance to cover the belongings within your new home. Although not compulsory, you may choose to take out insurance to cover your mortgage repayments in case you fall ill or lose your job. You may also take out life cover, particularly if you have a young family. You need to factor all these costs into your calculations.


Use the Government’s independent website, Money Advice Service, to help you work out how much you can afford to pay off each month. You’ll need information about your incomings and outgoings, so you should gather together your payslips and copies of your bills. You may find it useful to keep a record of everything you buy for a week to get an idea of how much you spend. Once you know your budget, you can shop around for the best deal. The Money Advice Service website features tools that can help you compare different mortgages. (See Resources)

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