Monday 23rd December 2019
Determining what you can and can’t afford is not a simple process. A number of different factors go into consideration when deciding what is within your price range and how much you like the house is unfortunately only one of them. Income, savings and repayment history all influence the affordability of your future home and how much you will be able to borrow.
Your income is going to be the most important factor in determining what you can afford. It’s most attractive to lenders and best for you if your mortgage repayments don’t exceed 30% of your net salary. If most of your income comes from running a business, then lenders will look at the financial performance of your business when determining how much you are allowed to borrow.
Another factor that comes into consideration is the savings and equity you have when you apply for a home loan. A lender can look at your cash deposit or the equity you have from your current home to determine how big of a loan you can afford to pay off. The size of your deposit will also determine whether or not you will need to pay for Lenders’ Mortgage Insurance which is an additional cost you will need to factor in.
How well you have been paying off your mortgage and other debts will also be taken into account by lenders. Consolidating your debt and making additional repayments on your mortgage for increased equity can help you with approval for a new home loan.
Your income, savings and repayment history are all important factors in determining the affordability of your future home.
If you would like to learn more about what homes you can and can’t afford, contact us today!