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How Much to Borrow

By: Emma Eilbeck BA (hons) - Updated: 10 Jun 2010 | comments*Discuss
Mortgage Lender Borrow Money Repayments

When it comes to how much money you should borrow it all really depends on how much you earn, how much debt you are already in and the value of the property you want to buy.A lot of people will go down the route of borrowing as much as a lender is willing to give them, but this isn’t always the best idea.

It is all about balancing risk accordingly, it is no good working out how much you can borrow but not leaving any money for an emergency or if something goes wrong. A lender will normally lend you around three times your income, which is what you should base your repayments on.

A lender may be able to lend you more than this, which could mean that you may be able to get a bigger house or better property, but beware, it will also mean you will be paying back more. It is worth starting off small when it comes to repayments and then increasing this as time goes on.How much you borrow will also be determined by what type of mortgage you are applying for, for example if you are self-employed you will know yourself how much you earn and whether you will be able to pay back the amount the lender is proposing.

Things to Consider

When looking at how much you should borrow, you should think long-term and about any large expenses that you may have to pay in the next few years. If you planning a wedding or want to go travelling then you should take that into account and budget for this. Always go for what you can afford and don’t think that the lender must know best because they are offering you such a big mortgage.

Similarly, you should also decide if you want to borrow more than the lender is offering you and apply for a top-up loan for something such as an extension. It may be that you are planning renovations to your property and it may make sense to consolidate this loan into your mortgage. The lender may be more willing to give you more money if they know that it is going to add value to the property, it may also be cheaper then other loans you can get.You should always think about your personal situation, and if you are borrowing with your partner then look at the risk of one of you loosing your job, and for how long you will be able to keep up repayments.

When borrowing for your mortgage it is worthwhile putting all your eggs into one basket, and if you have any savings then use them towards your deposit, as this will mean you pay less in the long-run and will own more equity in your home, which is better then having it sitting in the bank.

There is no easy answer as to how much you should borrow when it comes to your mortgage. There is always going to be risk involved, but it is how you can manage this and what you feel comfortable with. Don’t just take as much as you can get, think realistically about how much you can repay.

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