Mortgages
Buying a house is probably the biggest investment you're ever likely to make, so it's really important to get all the information you need on mortgages and legal matters before you start.
Borrowing From A Mortgage Lender
As a general rule, mortgage companies will allow you to borrow three times your salary, or two and a half times your joint salaries if you're buying with someone else.
However, in the current market there are many different types of mortgage available, some of which will let you borrow more than this. For example, some companies will allow two people buying together to borrow three times the greater salary and one times the lesser.
There are also many innovative schemes around, such as those that allow borrowers to add the rental income from letting one room to their salary before their income multiples are assessed.
It's worth seeking advice from two or three independent mortgage or financial advisers to find the best deal for you. Remember, though, that even if interest rates are low now, there's absolutely no guarantee they'll stay that way.
Never keep back any information on debts or county court judgements when securing a mortgage; it could come back to haunt you.
Deposits For Your Mortgage
It's worth trying to save as much as possible for an initial deposit, to secure the best repayment deals. With property prices as they are today, however, saving even a five or ten per cent deposit can be a real problem.
If your deposit leaves you flat broke, some mortgage companies will offer you the incentive of cash-back after completion, but you may have to pay a fee (redemption penalty) if you decide to pull out of the agreement.
If it's a choice between paying off expensive debts such as credit cards or personal loans and saving a deposit, it's often advisable to do the former and take out the best 100 per cent mortgage available. The choice and rates of such mortgages have become wider and more competitive in the past few years.
Types of mortgage
The basic decision you have to make is how you're going to repay the money you've borrowed. Don't be confused - there are only two basic types of mortgage:
* repayment, where the capital is re-paid gradually over the term of the mortgage
* interest only, which, as the name suggests, is where you only pay the monthly interest of the mortgage. However, your lender will stipulate that you set up a repayment vehicle, such as an ISA, an endowment policy, or a pension plan which, when it matures, can be used to pay off the outstanding debt. If you take out this type of mortgage, check regularly that you're on target to pay off the mortgage when it's due. If not, then increase your savings.
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