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Buying a house
Buying a house is a long drawn process and sometimes takes months to get completed. Right from identifying the property you want to purchase to working out the nitty gritties of the mortgage loan to setting up home, its really a long, long way from thought to reality.
What should come first?
As far as the nexus between finding a home and deciding on the amount of money you want to borrow, it’s a chicken and egg story. Plenty of first-timer's get confused as to how to go about it. Should you first look for the house and then borrow enough money to be able to buy it or decide on how much you want to borrow and then look for a house that fits your budget. Ideally, the second option is the way to go as this filters out the places you can't afford, thus resulting in lesser wastage of time, money and energy looking at places that are way beyond your budget, in any case.
Any lender, whom you might approach, would first want to assess you as a potential borrower. The lender's assessment is usually based on factors such as savings, salary and potential earnings that you as a client may be able to contribute towards the purchase of the property.
How much to borrow?
A mortgage is a loan that is secured on your property. If you borrow more than you can afford to repay, you stand the risk of losing your home. Mortgage affordability is a concept that you must keep in mind when you think of taking a mortgage. It’s not about how much the lender will give but about how much you need and are able to repay easily. Keeping a check will stop you from over-committing yourself. Most of the estate agents and brokers prefer working with such clients as they have a clear picture of what they can afford.
What is the basis of mortgage calculation?
Mortgage calculation is based on a variety of factors such as the age and occupation of the applicant. Mortgages are usually taken for long term, periods spanning anywhere from 15 to 25 years, hence the lender would like to know if the applicant has a career that will enable him or her to finance the repayments for the coming years. The salary bracket is also an important point that is usually considered by lenders to determine the loan eligibility. Generally, a multiple of the current salary is the rule, some lenders offer up to three times their salary while some offer even up to 5 times their salary. Savings that the applicant has is taken into consideration. Usually a percentage of the total property value has to be made as a down payment.
What is a mortgage calculator?
It is essentially a simple calculation of the mortgage amount, the interest paid and the amount of years that are required to complete the repayments. This will show the sum for monthly repayments, the total amount of interest that would be added at its current rte and the total amount repayable.
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