The first thing you need to do is work out how much you can spend on a house. The biggest factor involved with this is, how much money you bring in annually. There are however, many other factors that are taken into consideration when working out your budget.
Most people will be offered around 4.5 times their annual income by a mortgage broker but there are several things that can reduce or increase the amount offered.
Having a joint application will have a big effect on the amount offered, if, for example, you are married and your partner is on a low wage or income it is better NOT to go for a joint mortgage, an average between both incomes will be used rather than your total household income. If you have children, again, an amount will be deducted from the final offer for each dependent.
The bigger the deposit you have will make positive effect on your application, not only will you be able to add this to your mortgage amount to have a bigger grand total for house hunting, but also a mortgage lender may push up the amount they can give you and lower the interest rate. You will need at least a 5% deposit but 10% or even 25% will give you a better deal with a lower interest rate.
*There is now some GREAT NEWS for people on TAX CREDITS!!!*
There are quite a few mortgage brokers around now that are tax credit friendly, they will work out your income including your working tax credits and family tax credits. The best one i have found myself is Halifax.
There are lots of mortgage calculators online which are good, BBC mortgage calculator, Lloyds TSB, Money Matters, Halifax, Money supermarket.com etc.. Which can give you an idea of repayment amounts but always talk to an advisor for a more up to date account of interest rates and monthly payments.
Independent advisers at estate agents are very good and can give you lots of up to date information however, I have found better deals by going straight to the mortgage brokers and talking to their advisers. Most building societies and banks will have their own advisers such as HALIFAX, LLOYDSTSB, ABBEY, NAT WEST, NATIONWIDE and HS BC
When you work out how much you can spend remember to allow for insurances. You will have to take out various insurance covers such as life cover, mortgage protection and building insurance. Theses will have to be in place or the lender will not give you the loan. You can get quotes from estate agents or mortgage brokers but it sometimes works out a bit cheaper to go straight to insurance companies such as Direct line insurance, Zurich, Prudential or Axa. Some supermarkets offer great deals on insurance. Just make sure that the mortgage lender is happy with the level of cover that you have.
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