ANSWERS: 1
  • When looking for a house, one of the important things to keep in mind is how much money you could borrow for your mortgage. If you fell in love with a house that cost £500,000 and you only could get a mortgage for £250,000, you probably can't get that house. Determining how much you can get for a mortgage relies on multiple issues. In the end, though, the amount you can get depends entirely on the bank.

    Savings

    At one point, banks typically lent money up to three times the amount you made yearly in your salary. If you had a spouse, the banks would lend to you 2 1/2 times the amount of a joint salary. However, the price of houses in the UK has gone up much faster than salaries and therefore, banks had to change their policy. To calculate the amount of money you can borrow for a UK mortgage, the banks look at how much money is brought into the house combined. So, if you and a spouse, together, were to bring in £75,000, a bank might be willing to lend you around £225,000 and upwards of £300,00. However, the banks are also interested in how much money you have deposited in a bank account.

    Deposits

    While you might not be making a lot of money each year, if you had deposited the majority of your salary each month, the bank will see that you have a larger deposit and therefore, provide a larger loan for you because your deposit is a larger percentage of the loan. This makes them feel more comfortable to loan because they believe you are safer with your money.

    Expenses

    Finally, they look at your expenses. If you have to spend £2,000 a month (excluding rent and mortgage payments), they might be less willing to loan a large amount than if you were only paying £500 a month. Because of this, getting a loan for a house can be difficult because most people have other expenses than just their rent and therefore, can't spend all their money on their mortgage.

    Bank Considerations

    A bank's method of earning profit is in its ability to loan money out. If the bank were to be too safe and only loan to the surest investments, they wouldn't make enough money. After meeting with the loan provider, you might be able to haggle a slightly higher interest rate to get a larger amount of money. In the end, though, the amount you can borrow all depends on the individual mortgage institution.

    Source:

    Fool.co.uk: Mortgage Calculator in the UK

Copyright 2023, Wired Ivy, LLC

Answerbag | Terms of Service | Privacy Policy