Mortgages
What is a mortgage?
A mortgage is a loan secured against property to assist with its purchase. A bank, building society or any other type of lender will provide a proportion of the funds required, usually between 75 - 95% of its value. The term of the loan is commonly 25 years and payments made monthly. There are hundreds of different types of mortgages and many variations depending on a whole host of factors and the differing needs of borrowers.
What can I borrow?
There are standard calculations offering general guidance about the amount you can borrow, these are known as “lending multiples”.
Historically the following multiples were the norm:-
• A single person application
If you are applying for a mortgage on your own, you can usually borrow three and a half times your gross annual income.
• Partnered applications
If you are applying for a joint mortgage then you can borrow either:-
Three and a half times the gross annual income of the higher earner plus one years gross income of the lower earner; or
Two and three quarter times the combined gross annual income of both partners.
However since the average home now costs six times the average salary, a number of mortgage lenders are prepared to offer between five and eight times your annual income.
The best way to find out how much you can borrow is to get advice from an independent mortgage adviser.
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