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You probably have an idea of the house that you
want to buy and how much you think you can afford. But how much can
you actually borrow?
Repayments - how much can you actually
afford to repay? The lenders want to be sure you can afford to make
mortgage repayments after all other expenditures. They want to know
that you have a solid, secure income, so you are able to make
regular payments. If you are a couple then the lenders will look at
your combined income. If you have children then they know that your
expenditure will be some what higher. If you are renting out a room
in the house for additional income you might be able to borrow more.
It will also depend on the percentage you are borrowing on the
house. If you have low equity in the property then you will need
higher income. The lenders will also look at your credit rating.
Percentage Borrowed - Some lenders can give
up to 110% of the value of a home, this is very rare, and only in
some countries. However 95-100% is common enough. It can be more
expensive borrowing this much, you would be charged a low equity
premium, and the property will also likely require a valuation.
Around 60-80% of the value of the home is a more typical mortgage
loan. Which means if you want to buy a $250,000 house you need put
down between $50-100,000 deposit.
The lenders will lend more if the house is going to be your home.
It is very common for the lenders to lend entirely on your income,
usually between 4 or 5 times what you earn a year.
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