Lenders use different ways to work out the amount of mortgage they will give you. They take into account:

- your income, the type and security of your job;
- whether you are borrowing on your own or with someone else;
- your savings and outstanding loans;
- your credit history and rating;
- whether anyone will act as a guarantor (a person who agreees to repy your mortgage if you are not able to);
- the value of the property you want to buy

As general rule, most lenders will try to make sure that your mortgage repayments plus any other loan repayments you have don't go above 40% of your monthly take-home pay. If you already have other loan repayments, your lender may:
- offer you a smaller mortgage;
- offer you a mortgage over a longer term;
- ask that you pay off your loans before giving you a mortgage.

The average mortgage term is 20 years, but you can get a mortgage for any term from 5 to 40 years.

With a shorter term, you will have higher monthly repayments but, because you are repaying the mortgage over a shorter time, you pay less interest in total.

With a longer term, you will have lower monthly repayments but you will pay more interest in total.

Of course, to afford your mortgage you may have to choose a longer term. But remember, you can shorten the term of your mortgage at any time and save interest by making extra payments when you can afford them.

Step 1: Decide the type of mortgage you want

Annuity (or repayment) morgage: this is the most common type of mortgage. Your monthly payment is made up of:
- the interest payment; plus
- the capital (original loan amount) repayment.

Combined current or savings account mortgage: this is an annuity mortgage that combines a current or savings account(s) and mortgage account in one. You make the usual monthly repayments, but with this type of mortgage, any money you have in your current or savings account(s) will reduce the interest you owe on your mortgage.

Interest-only mortgage: with this type of mortgage, your monthly repayment covers only the interest on your loan, and not the capital. The original amount you borrowed stays the same for the term of the mortgage. At the end of the term, you must repy the original loan in a lump sum. There are two main types of interest-only mortgages:

- Pension mortgage: you can only take out a pension mortgage only if you are self-employed or are an employee who cannot join an employer pension scheme. With a pension mortgage, you pay off your mortgage when you retire by cashing in a personal pension policy.

- Endowment mortgage: you pay off your mortgage by cashing in a separate investment policy (called an endowment policy) at the end of the mortgage term. Please note that your endowment policy growth is not guaranteed. It may not rise in value by enough to pay off your original mortgage. If your policy grows slower than expected, you may have to extend the policy term, or make higher payments each month to pay off the shortfall.

Step 2: Get information on the interest rate options

There are 3 interest rate options available:

1.     Variable rate options
2.     Fixed rate
3.     Split rate

Step 3: Check out flexible payment options

- Increased and lump-sum payments: If you have a variable-rate mortgage, most lenders will allow you to:
  a) pay more each month than the agreed repayment; and
  b) pay ocasional lump sums

- Late (deferred) start option: this option allows you to make no repayments for a number of months at the start of your motgage. Your lender charges interest on the whole mortgage for these months, and adds this extra interest to the original loan. So, your mortgage balance actually rises even before you begin to make your repayments.

- Payment breaks: some lenders offer "payment break" options for times when you need extra cash, such as Christmas or holidays. You could:
  a) spread your monthly repayments over a shorter number of months, for example, 10 months instead of 12; or
  b) postpone repayments for a time, for example, three months.

Contact us for further information