Buyers Guide – Part 1 – How Much?

Categories: Buying Property Estate Agents Fees

Buying a UK Property Step 1 – How much can I borrow?

So you have decided that you are buying a UK property, but exactly how much can you afford? This article which is part of the buying a UK property set of articles will try to answer a few questions and point you in the right direction in order to make the best decision possible.

Costs
On top of the cost of the actual house purchase cost itself, there is a myriad of other, one-off expenses when buying a home or moving house which all add up, if your not prepared for them all they can easily catch you out. And the last thing you want is to not be prepared.

In order to get a good idea of what sort of house you can realistically hope to buy, you also need to take these extra costs into account. To help you do your sums, below is a very simplistic guide to working out how much money you have to spend and what the costs are. Take particular care with stamp duty land tax ( a whole other article on this alone ) as, with the recent inflation of property prices, for properties over £250,000 this has become a major consideration.
Calculating Your Price Range

  •  How Much Should You Borrow?
  •  The One-Off Costs
    o Estate agents fees
    o Solicitor fees
    o Stamp Duty
    o Removal costs
    o Paying off any gas electricity costs outstanding on existing property.
    o Etc etc

How much should you borrow?
Before looking at properties, you should consult a lender or mortgage adviser as to what your maximum possible loan would be. This will be based on the size of your deposit and how much you earn.
All buyers need to put down a deposit on the property – a mortgage lender will rarely pay the whole price of the property. You should try to put down at least 5 per cent of the value of the home as a deposit, and more if possible. The smaller the deposit you put down, the more your lender will charge you for the extra risk. Most mortgage lenders charge a ‘mortgage indemnity guarantee fee’ (MIG), or a fee for loaning a higher percentage of the value, on bigger loans. If you do not have enough money for the deposit, for example if your house is not sold yet, it is possible to get a ‘bridging loan’ from your bank, which will be repayable on the sale of your house.
Lenders will usually lend up to three times the size of your annual income, though some will lend up to four times your income. If you are buying as a couple, this increases to either three times the first income plus one year of the second income, or two-and-a-half times your joint income. You will need to calculate which is best for your individual circumstances to work out which way would allow you a higher loan and find a mortgage with which you can get a joint income allowance which suits you. Your lender may contact your employer to confirm your income, or if you are self-employed and taking out a self-cert deal you may have to supply proof of your income.
The “credit crunch” that started in 2007 changed the whole process of mortgage lending. This changed the amount banks and lenders could borrow and made them less likely to take risks, as they had done previously.
Deals for those with small deposits, such as 100 per cent mortgages, were commonplace prior to 2007 but since have become increasingly rare.

admin

I am a Son, a Father,a Husband and i love property of all type, i am building this site to help other avoid the pitfalls i had. In the little spare time that i do have i am trying to learn to fly model helicopters.

Latest Posts by admin

Leave a Reply

Copyright © 2012 Agentright