In an age where the interest rates are steadily increasing and the number of new mortgage approvals stand at a 12 month low, what does it take to get a mortgage? When deciding on which mortgage is right for you, there are several factors to consider, such as working out your budget, budgeting for service charges and "shopping" around for choices.

One of the first things to do when deciding on a mortgage is to work out what your budget is and also the average sum you'll be able to pay back each month. You can do this yourself or obtain the help of an Independent Financial Advisor (IFA) for a fee. By looking at your yearly income and expenditures (for instance utility bills, credit card payments), mortgage lenders will estimate the amount they're willing to lend you by subtracting the outgoings from your income.

The common rule is somewhere along the lines of 3.25 times your salary based on a single income. For example, if you earn £30,000 per annum then, theoretically, you could borrow up to £97,500 for your mortgage. For joint borrowers, the general rule of thumb is 3.25 for the first income and one times the second income - or 2.5 times if both incomes are combined. This, however, is not set in stone and some lenders may offer more or less depending on your circumstances.

The key point is not to overestimate your figures when working out your budget. You may have difficulty in making the repayments if your circumstances change or if the interest rate goes up. Other factors include added costs, such as home or life insurance. Another issue to be aware of is a service charge and this may come in the form of a solicitor's fee or stamp duty.

Once the budget is in place and you've calculated how much you can afford to borrow, the next step is choosing a mortgage lender. Again, you can do this by yourself (there are numerous websites online that can collate information for you) or get advice from IFAs or mortgage brokers. If you opt for the latter choice, try and find out if they're independent - if they're connected with a lender then your choices may be limited or biased towards a particular company.

So, by now, you've worked out your budget and you've decided on a mortgage lender. The only thing left to do is sign along the dotted line on the paperwork and voila! You have a mortgage. One word of caution though: take your time and consider all the options before committing yourself to a specific repayment plan. Although there are many competitive mortgages out there, those that seem "too good to be true" usually are. Read the fine print and, if there's anything you're unsure of, just ask your lender - because once you're locked into a mortgage, it can be difficult and expensive to change.


Tags: rule of thumb, credit card payments, set in stone, several factors, incomes, new mortgage, utility bills, repayments, mortgage lenders, key point, mortgage brokers, mortgage lender, solicitor, service charges, stamp duty, yearly income, outgoings, independent financial advisor, mortgage approvals