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There aren't
many of us who can afford to go out
and buy a house using cash. They’re
also too expensive to put on a credit
card or buy using a normal bank loan.
So most of us buy our homes using a
mortgage, which is a special sort of
loan designed for buying homes.
The amount
of money you can borrow does vary
slightly but on the whole, most mortgage
lenders say you can borrow up to
3.5 times your annual gross salary,
which means the amount you get paid
before tax. If you’re buying
with someone else, then you can usually
choose 2.75 times your combined salary
or 3.5 times the higher salary.
Choosing a mortgage
There are masses
of different sorts of mortgages to
choose from, all with slightly different
features and benefits so it’s
a good idea to invest some time having
a look around and learning a bit about
mortgages before you sign up. There
are plenty of financial
advisers and special mortgage advisers who
can help you
or you can do the leg work yourself,
dropping in on your local bank or
building society branches or searching
on the Internet.
The
Financial Services Authority website
has lots of good information on mortgages
to help you on your way.
Making sure you can repay it
Taking out
a mortgage is a big commitment so
you need to make sure that you’ll
be able to keep up with the monthly
repayments. If you can’t, you
could end up losing your home. Mortgages
are what are known as secured loans,
which means that your mortgage provider
is lending you the money to the buy
the home on the understanding that
if you ever find yourself in a position
where you can’t pay them back,
they get your home. This is called
repossession.
Our pages on budgeting can
help you work out where your money
is going and guide you through drawing
up a budget.
Your mortgage
provider will also want to know all
about your finances and check that
you are who you say you are so it’s
important that you can lay your hands
on records such as your bank statements
and payslips. They will also check
your credit history to make sure
you don’t have lots
of debts that you haven’t been
able to pay off. You may want to take
a look at the section
keeping
records and financial information and
you may find it useful to find out how
to check your credit history. You
may also find it useful to have a look
at our pages on dealing
with debt.
In principle offers
Because
you’ll want to know
how much money you can borrow before
you set off house hunting, most mortgage
lenders will give you what’s
known as an ‘in principle offer’.
This is helpful because it sets out
exactly how much money you have to
spend on your home and also demonstrates
that you are serious about buying.
But you’re not signing up for
anything so if you want to change mortgage
providers later on you can. You should
also bear in mind that an ‘in
principle offer’ is made before
the mortgage lender has looked into
your finances and credit history so
it is not a guarantee that they will
lend you the money.
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