Calculating the Cost of your First Mortgage

Buying a house is rightly regarded as a nerve-wracking, stressful and frustrating process. With the recent doom and gloom of global economic ill-health, cheap and easy mortgages are a thing of the past, making the process tougher than ever.

But this new level difficulty in obtaining credit for a house should be viewed in a positive light. In fact, there never was a good time to borrow more than you can afford. It was an illusion, and one that was largely responsible for the ultimate failure of the sub-prime mortgage market in the US, one of the major strands of global recession. Nowadays, borrowers are forced to study the market more realistically. Mortgage calculators and other investment tools are there to help with this. One of the better tools out there is Santander’s calculator for mortgages – click the link for a quote.

A mortgage calculator will help you figure out how much you can borrow, based on your annual income and the area you want to purchase in. Historically, mortgage lenders offered about twice a household’s income, or three times the main breadwinner’s income. As the property boom took hold in the mid-noughties, affordability indexes were adjusted to include more potential borrowers – often people for whom ownership had previously been out of reach.

These days, the borrowing criteria is a lot more strict. A larger deposit may be necessary for security, and a stellar credit history is a must. Even if you think you can squeeze more money from a lender, you’d be wise to think twice. Consider your current earnings, and the possibility – however slim – of losing your job or having you wages cut. ‘Job security’ is not what is once was. Bear in mind that interest rates can go up at the drop of a hat, so don’t spread your money too thinly. Keep an eye on the finance sections of the newspapers so you can get a feel for the fluctuations in the market.

Above all, be modest. Remember, it’s called a property ‘ladder’, the idea being that you can climb up when you start earning more money. Don’t try to jump straight to the third rung. Figure out where the first rung is (it’s different for everyone) and stick to that.

Be wary of small-time lenders offering big-time deals. No financial institution is 100% secure, but bigger is still safer then smaller. Try a reputable company like the aforementioned Santander, and run your numbers through their mortgage calculator to see if your ideal home is actually affordable for someone in your position.