Welcome to Michelle’s Property Q&A, my new segment aimed at addressing the public’s top questions and concerns about property investment and ownership in the UK.
Whether you are a seasoned investor or a first-time homebuyer, there will inevitably be times in which you just don’t know what your best options are.
Looking to purchase your first home and don’t know where to start? Considering expanding your portfolio and don’t know which type of property to buy? Want to know if you have enough equity to retire on?
Send your questions to hear my top property tips and strategies gained over my 20 years in the property industry, including hundreds of homes under management and thousands of property purchases for my satisfied clients.
Our first question comes from @JonasJamie, who asks:
I want to buy my first home. How do I know how much I can borrow?
Very good questions Jonas. When you apply for a mortgage, most UK lenders will cap your loan-to-income ratio at four-and-a-half times your income.
They will also assess what level of monthly payments you can afford, after taking into account your various personal and living expenses as well as your income.
This is called an affordability assessment. Lenders may also look at giving your income a ‘stress test’, to gage your ability to repay the mortgage if/when unforeseen complications arise. This may include changes such as; redundancy, having a baby, or taking a career break.
If the lender thinks you won’t be able to afford your mortgage payments in these circumstances, they might limit how much you can borrow. The amount you can borrow also differs depending on the lender you choose. Your best bet is to have a free consultation with a reputable mortgage advisor in your area, as they would be the ones to search the mortgage market for you in order to ensure you get your best rates possible.
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Until next time, happy investing!