how much mortgage do i qualify for

how much mortgage do i qualify for

The question how much mortgage do I qualify for? Is one that is frequently asked at some point in our lives? The answer however is not quite as simple. A mortgage is the phrase given to a loan that is to be used to purchase some kind of land or assets, most regularly of all a residential property like a house or an apartment and most of the time it is also our home. It is also referred to as a home loan by some people and is quite simply a secured financial loan, not unlike to any other secured loan in most ways. The term secured loan means that there is an asset of value, which can be reposed by the lender in the event that the borrower cannot or does not make repayments as dictated in the conditions of the loan.

Even though the home loan or mortgage does not differ to any other secured loan in most ways, because they are on average the largest loan the majority of the population takes out in the whole lives, they are allowed to be paid back over a much longer term than most other types of loan. In general, a mortgage is repaid over 30 years but in current times mortgage companies have stretched this to 40 or even 50 years although this does count on the age of the borrower at the time of submission.

So let us get back to the question at hand, how much mortgage do I qualify for? Well to answer the question best we need to look at this from the lender’s point of view. When any bank or mortgage company is asked for a home loan, they have to weigh up the risks and rewards involved from their point of view, so are you a high risk or a safe bet?

What makes me a high risk?

From a lender’s point of view there are three main reasons you will be a considered a high risk. Firstly, the percentage of equity you wish to borrow. This means how much of the total value of your property to you need, for example your house is valued at $300,000 and you only have a deposit of $5,000 and wish to borrow $295,000. That is just over 98% of the total value and is very high risk. The reasoning behind this is simple enough, if you fail to make repayments and the house has to be repossessed and sold on, it is very likely that the bank will lose more than $5000 in the process and that is without taking in consideration a small dip in house prices. In fact, you will find it hard to borrow over 80% in the current market. The other main factors are your salary or the combined salary of the applicants, and your credit history/current financial obligations.

What makes me a safe bet?

The reasons for being a safe bet are more or less, the exact opposites of being a high risk. If you have a 40% deposit to put down and only need borrow 60% you are a safe bet. If you have a large and stable income and are only looking to borrow twice your annual income or your monthly repayments will only be 15% of your monthly income after tax you are a safe bet.

The sum you can borrow is frankly linked to your yearly revenue and is one of the major aspects is deciding how much you can borrow. The interest rates will vary according to the risk too and perhaps the best way to get the best mortgage deal is to seek advice from established lenders and advisors who can help get the most positive answer to the question, how much mortgage do I qualify for?

how much mortgage do i qualify for