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House Keys Shrewsbury AccountantsAffordability: Lenders now work on affordability models, which take into account not only income, but also your regular outgoings, age, number of dependants and other factors which combined will determine the amount you can borrow, with the standard amount tending to be about four times your income, going up to a maximum of five times. However, if you have several dependants or large outgoings, this could be considerably less.

Deposits: The size of your deposit determines the mortgage interest rate that you pay. Virtually all lenders use a loan-to-value banding system which means you pay significantly more if you have a smaller deposit. Looking at the Post Office’s mortgage rates, for example, the lowest two-year fixed rate they offer if you have a 10% deposit is 5.75%. Yet, with a 15% deposit, the mortgage rate drops to 4.29% and if you could find 25% their rate falls to 2.98%. If however you are looking for one of the special “first-time buyers only” mortgages, that merely requires a 5% deposit, such as Nationwide’s “Save to Buy” scheme, you will have to pay a minimum of 6%

Mortgage types, repayment or interest-only? Perhaps the biggest change in recent weeks is the way that lenders view interest-only mortgages. For those looking to borrow more than 75% of the value of the property, this is now no longer an option for almost all lenders and will only be considered if you can demonstrate a viable way of eventually repaying the loan. In most cases, a repayment mortgage will be the only way to proceed.

Sharing the cost: For those of you who are unable to borrow the amount you need or don’t have much of a deposit, you may need to turn to the “Bank of Mum and Dad” and ask them to loan you the money needed, which in my experience usually means “give”, but you must play the game and only ask to borrow the money, but don’t mention when or how you intend to repay it!. Alternatively, your parents can act as guarantors on the loan, or to deposit savings with a lender which act as an “insurance” against higher loan-to-value borrowings.

There are other alternatives, the main one being schemes involving shared ownership. This involves housing associations or new-build house builders, allowing you to buy a percentage share of the property, say 50%, while paying rent on the balance. The remaining share can be bought later, when affordable, in stages known as stair-casing.

I wish you the very best of luck.