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How big a mortgage can I afford?

Paying off your loan to buy your home will be your largest
expense, but its not the only thing you have to budget
for as a homeowner.

The cost of your mortgage is spread out over 25 years but
there are a number of up front one-off costs you will
also have to pay.

As well as reducing the above costs a healthy deposit will
reduce your monthly payments in the long run as the smaller
the mortgage borrowed the less the monthly repayments.

If the purchase price of the property is above £60000 then
you will have to pay a government tax called stamp duty.
This is charged at 1% up to £250000,3% up to £500000
and 4% on those over £500000.

For example purchasing a property worth £90000
would cost £900 in stamp duty usually payable through
your solcitor.

Monthly repayments - to work out roughly the maximum affordable
mortgage payment the following figures may come in handy.

interest rate 3% cost per £1000 = £4.79
interest rate 4% cost per £1000 = £5.33
interest rate 5% cost per £1000 = £5.91
interest rate 6% cost per £1000 = £6.52
interest rate 7% cost per £1000 = £7.15
interest rate 8% cost per £1000 = £7.81

for example using above example on a mortgage
of £50000 at an interest rate of 6%
would cost approx £326 per month ( ie 50 x 6.52 )

Bear in the mind there will usually be a survey or homebuyers report to pay for
in the region of £100 - £500 depending on value of property
this will have to be paid to lender up front in most cases.

On completion there will generally be completion/arrangement fees added to the loan by lender
and finally the solicitors costs which will vary again on size of property
however even a modest property will attract legal costs
in the region of £500 - 600, these fees will have to be paid by you
on completion or occasionally prior to completion by solicitor.

To sum up in terms of up front costs we have-

Deposit (variable)
Survey costs ( £100 - %500 )
Removals costs

On/after completion we have-
solicitors costs
lenders fees (usually included in loan repayments)
stamp duty - if applicable
brokers fee - if agreed

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YOUR HOME IS AR RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT. ALL LOANS ARE SUBJECT TO STATUS. SECURED LOANS ARE SECURED ON PROPERTY