How Large A Loan Can You Afford

How Large A Loan Can You Afford

How Large a​ Loan Can you​ Afford?
The first step to​ finding the​ right home for your needs is​ to​ work out how much money you​ can afford to​ spend on​ the​ property .​
Although you​ want to​ get a​ good property,​ you​ also want it​ to​ be affordable,​ and knowing what you​ can spend will help you​ to​ find the​ right home at​ the​ right price .​
If you​ are unsure about how much you​ can afford to​ spend on​ your mortgage loan,​ then here is​ some advice to​ help you​ work it​ out.
How much do you​ earn?
Your mortgage loan will be secured against your new property,​ but to​ work out how much you​ can borrow the​ lender will look at​ your earnings .​
They do not just want to​ know how much money you​ have now,​ but what you​ are likely to​ earn over the​ next 20 or​ 30 years .​
Mortgage loans last a​ long time,​ and so the​ lender has to​ see that you​ will be able to​ pay off the​ loan both now and in​ ten years' time .​
The more you​ earn and the​ more stable your job,​ the​ better the​ chances of​ you​ getting a​ larger mortgage.
Credit history
Another important factor that determines how much you​ can afford is​ your credit history .​
The lender will do a​ credit check to​ make sure that you​ are a​ responsible borrower,​ and that you​ don't have any past financial problems .​
Before applying for a​ mortgage loan,​ you​ should check that your credit report is​ in​ order and that there are no mistakes .​
a​ good credit history will allow you​ to​ borrow more.
How much you​ can afford to​ borrow will allow depend on​ how long you​ want the​ mortgage loan term to​ be .​
If you​ want a​ long mortgage term of​ 25 years,​ then your monthly payments will be much lower,​ but you​ will pay back a​ lot more in​ interest .​
However,​ getting a​ mortgage loan term of​ 15 years will mean higher payments,​ but less overall costs from interest .​
Also,​ if​ you​ are only planning to​ stay in​ a​ property for a​ few years,​ it​ may not be worth getting a​ mortgage .​
Changing properties will involve many costs,​ and so it​ might be more cost effective to​ rent until you​ can afford a​ property that you​ will stay in​ for longer.
Be honest with yourself
As well as​ the​ lender deciding how much you​ can afford,​ you​ need to​ be honest with yourself about your financial capabilities .​
Just because a​ lender will loan you​ a​ certain amount of​ money does not mean you​ can really afford it .​
If you​ cut back on​ everything else then you​ might be able to​ afford the​ mortgage .​
However,​ if​ your lifestyle is​ more extravagant,​ then getting a​ large mortgage may not be a​ good idea .​
Try and be conservative,​ and borrow an​ amount that you​ can afford easily .​
This will make the​ mortgage loan less risky and allow you​ to​ make payments even during tough times .​
However much you​ decide to​ borrow make sure you​ can afford the​ payments,​ because you​ never want to​ be in​ a​ situation where your house is​ taken away from you​ because you​ cannot pay .​
Sacrifice that extra bedroom for financial security and you​ will benefit in​ the​ long-term.

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