1. The Amount of Monthly Payments You Can Afford
This is obviously the single most important question. Everyone's financial status is different, but for the majority of people how much they can afford on a monthly basis relates directly to their monthly take home pay.
Some people earn extra money each year from a yearly bonus but mortgage companies usually refuse to take these into account as they're never actually guaranteed to be paid. But bonuses can still be used by the mortgage holder to perhaps help with either future monthly payments or to pay back part of the principal.
- The simplest way to decide what you can afford to pay on a monthly basis is to work out what your monthly income is after tax and then subtract all your outgoings
- Take into account two important factors
1. All or part of your monthly outgoings may increase (perhaps you're planning for another child etc)
2. Mortgage payments are calculated off Base Rates (the official Bank of England interest rate) which fluctuate over time, sometimes dramatically
If base rates are at present 4% and they rise to 6.5% over the next few years then you must factor in an increase to your monthly mortgage payments. It is imperative to do your homework on this topic even if you feel that your financial situation or the UK economy in general is likely to remain very stable.
|
COST OF MORTGAGE PAYMENTS PER £25,000
|
|
APR
|
Repayment Mortgage
|
Interest
Only
Mortgage
|
|
|
10 Years
|
15 Years
|
20 Years
|
25 Years
|
Any Term
|
|
2%
|
£230
|
£161
|
£126
|
£106
|
£41
|
|
4%
|
£252
|
£185
|
£151
|
£132
|
£83
|
|
6%
|
£278
|
£211
|
£178
|
£161
|
£125
|
|
8%
|
£304
|
£239
|
£209
|
£192
|
£166
|
|
10%
|
£330
|
£269
|
£241
|
£275
|
£208
|
|
12%
|
£359
|
£300
|
£275
|
£263
|
£250
|