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What is a mortgage?
Mortgages are usually loans from a bank, building society or financial institution used to fund a home or property, which is paid back (with interest) over a number of years.
Your home acts as the collateral
The property itself is used as a collateral against the loan. As your property acts as a security for the loan, it may be at risk if you default on the repayments. In case you default on repayments, the mortgage lender has the right to repossess your home after evicting you and selling it to recover the loan amount.
Your creditworthiness
Prior to giving you a loan, the moneylender will ensure your source of income and the amount you receive as income from your employers. They may also make credit checks to establish your creditworthiness and make sure you do not have any legal cases pending against you for default of loan repayments in the past.
Facts they want to know
On the basis of your age and income, you will be offered a loan, which is usually up to 3 times your regular yearly income. In case you are married, engaged or living with your partner, it may be possible to include one year of your partner's annual income. Some lenders even allow you a loan up to 2.5 times your joint income.
In addition to your income there are several other factors are considered to determine the value of the loan you may be allowed. The major factors involved are -
1. The type of property you are interest in - for e.g. leasehold and converted properties can make a difference to the percentage loan available.
2. Liquid cash available to make a deposit as against the value of the property you want to buy, the percentage loan you will need.
3. Your employment status - whether you work full-time, part-time, self-employed or on contract, to determine the certainty of income from this. Also the duration of employment is considered.
4. Other loans and liabilities you may have and the amount outstanding and the value of monthly repayments.
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