How Much Can You Borrow For Your Mortgage?

Getting a mortgage is crucial for most people that want to buy their own home. And while it might not seem like a lot at first, finding the right mortgage amount can be extremely difficult. That’s because we all target those higher rates, without worrying about any potential long term challenges. It’s imperative to figure out how much you can borrow, and where you should stop when it comes to the mortgage.

Will you apply along with your significant other?

If that’s the case, it’s easier because you will have the household income here and not just your income. That’s an important aspect to consider, because it does make things slightly easier. With that in mind, there can be certain challenges that arise, and it’s one of those things that can lead to various challenges down the line.

Getting as much money as you can for the deposit

The more you offer as a deposit, the less you want to borrow. Some people think that borrowing is ok, and that might be true, but it also brings financial hardship. The most important thing is to try and accumulate as much money as you can on your own. Then, you just use the mortgage as your means to borrow the remaining money.

What’s the main issue here is that a lot of people borrow money with a very low deposit. And that’s when lenders tend to increase mortgage rates, because there are inherent risks. It’s important to understand all these challenges, and find ways to improve upon the situation, as that can indeed make a difference.

How much should you borrow?

It always depends on the situation and how much you earn. Based on various estimates worldwide, the safest approach is to ensure that the mortgage payment on a monthly basis is not over 28% of your income. If you end up having to spend more, then that means you bought a house you can’t really afford.

Of course, that doesn’t mean you will be unable to finalize the mortgage payments. However, you may have to make some sacrifices, which is not always the ideal thing to do. What really matters is to figure out the monthly payments, see if you are comfortable with and then go from there. If you have to deal with over 28% of your income going towards the mortgage, then maybe you need to choose a different option!

Understand the mortgage payment structure

When you pay for a mortgage, you have multiple components that are a part of that payment.

• First, you have the principal, which is the amount you borrowed. If you borrowed $200k, then that’s the principal you have to pay back.
• Then, we have the interest. Every mortgage has an interest rate, but that’s something you will agree with the lender.
• After that, there are also taxes, such as property taxes that also tend to be a part of these payments.
• Lastly, you have insurance that needs to be paid. Insurance is usually not required if you have a down payment of at least 20%. But if it’s lower, you will be forced to pay some private mortgage insurance as well.

What factors will influence mortgage affordability in your case? There are multiple things that could influence your mortgage. These can be important when you try to find a solution and save some money on a mortgage. The interest rate, down payment, but also income stability are major factors that you have to think about.

And not only that, there’s also the debt to income ratio. If you have a lot of debt, that can have a very negative impact on your health and it can lead to all kinds of potential issues. In this case, the best approach is to narrow down how to tackle the borrowing process and find a solution that doesn’t cause any financial strain.

Using a mortgage calculator could help, because it tells you how much you can afford to pay based on your income. As we said, up to 28% tends to be the right option here, and that’s why you have to be as attentive as you can. A lot of the time, mortgages come with their own range of difficulty and can prove to be extremely challenging.

Closing thoughts

In the end, mortgages are that type of loan that will require planning and a lot of attention. With that in mind, a mortgage can have challenges, and a lot of different things go into acquiring such a loan in the first place. That’s why we think it’s crucial to plan everything beforehand, and focus on ensuring that the entire process is seamless. Plus, you want to avoid spending more than you can afford on a monthly basis. Otherwise, that can be a problem financially!