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Introduction to mortgages
There's a good range of products on offer today and although the increase in choice is great because it means more competitive rates, actually picking the right mortgage can be a bit bewildering. This article should make it all clear...
Work out your budget
Before you decide on a mortgage, work out how big your budget is and how much you'll be able to repay each month. Mortgage lenders will calculate how much they're willing to lend you by looking at your income.
Commonly you'll be able to borrow 3.25 times your salary on a single income. For joint borrowers you'll typically be offered 3.25 times for the first income, plus one times the second or 2.5 times the joint incomes. Some lenders may offer you more depending on your circumstances.
Don't overstretch yourself because you could find making repayments difficult if interest rates increase or your situation changes. When calculating your budget you'll also need to include added costs such as the loan for a deposit - if you haven't money saved for this - buildings and contents insurance and life insurance.
Budget for service charges
You may also have to budget for service charges if you're looking to buy a leasehold property. There'll also be initial costs, such as solicitors' fees and stamp duty.
Calculate your monthly outgoings, such as utility bills and credit card or loan commitments. When you subtract this from your monthly income you should have a good idea of how much you can afford to make in mortgage repayments.
shop around
Once you've worked out how much you can afford to borrow you can start shopping around. You can do this online or get advice from an independent financial adviser or mortgage broker.
If you decide to go with a broker or adviser, try to find out if they're independent. If they're linked to one or more lenders you may find your choice of product is limited. Or you could go straight to individual mortgage lenders for information about their products.
word of warning
Whichever product you go for, take your time and consider all your options before signing up.
There are some competitive deals to be had but if something sounds too good to be true, it probably is, so don't rush into anything you're not sure about.
Don't be pushed into anything you're not completely happy with and don't be afraid to ask questions, because once you're locked into a mortgage it may be complicated and costly to change.
It's the biggest loan for the most important purchase that you're ever likely to make, so impulse buying is definitely not a good idea.
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