UK Home Loans.
Whether you are buying a new home or changing lenders for re-mortgaging, you need to be sure you can afford the repayments. Lenders consider a number of things working out how much you can borrow, like your income and employment status, the property value, the outgoings and your credit history, although lenders use different rules, most of them share these guidelines:
* You can generally borrow three times your annual salary.
* Or you can borrow two and a half times your joint salaries.
* Sometimes you can borrow three times your higher salary plus the lower salary making a joint application.
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UK home loan brokers base their figures on your gross income before tax, sometimes including regular overtime or commission, but they will also look at your regular outgoings, such as service charges on the property, payments on other loans, child care and school fees. Lenders will take also into account the higher payments due later making sure you can afford all the repayments.
Besides the property, UK home loan lenders normally will ask you for a proof of your income, either your last three payslips or your P60 if you are employed for two or three years or audited accounts if you are self-employed. They may request another documents, including identity documents to see if you are who you say you are. Your passport and proof of your address are the most commonly requested.
UK home loans may be affected by your property value. Most often lenders will arrange a valuation to check how much your property is worth and the amount you can borrow. They usually offer up to 90 of the valuation, if they think you can afford it. This action is called LTV rate or "loan to value", flexible enough at this point that if you have high enough earnings or a guarantor, lenders may offer between 95 to 100 percent of the valuation and even more, although interest rates may be higher.
These thresholds vary between the different UK home loan lenders and maximum LTV rates typically reduce for properties above a certain value and extra insurance for high loans to value loans may be required.
If you take out a mortgage for a high percentage of the property's value, you will have to pay a mortgage insurance premium or mortgage indemnity guarantee (MIG) to cover your lender for taking the extra risk. This action may be costly.
It is more likely that UK home loan lenders will check your credit history and ask previous lenders or landlords for references before guaranteeing home loans. If your credit rating shows minor credit issues, this may not cause problems except if you have had difficulty with loans or rent payments in the past, affecting the amount you can borrow and you will more than likely pay a higher interest rate.
Many lenders also limit the amount they will lend according to certain types of property, as an example timber-framed houses, or even refusing to lend at all when the property is structurally unsound, unconventionally built or very old. However, it is possible to take a home loan by finding a lender who understands all those risks involved in the kind of property you want to buy.
Budget for the one-off costs of buying a property, such as administration and solicitor fees and Stamp Duty, and give the lender providers as much detail as you can about your income and outgoings, so they can offer the UK home loans you can afford.