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How much can we borrow for a mortgage?

One of the most common questions we receive here at Excite is: how much can we borrow for a mortgage? There was a time when this could be answered in a straightforward manner. But due to the credit crunch, recession and collapse of the housing market, lenders have tightened their belts. There have been major changes to the way in which lenders decide how much you can afford to borrow - and the mortgage application process is no longer so clear cut.

There have been few better times to buy a house. If you're buying your first home, you'll enjoy some of the lowest prices that we've seen in recent years. But while property prices are favourable for buyers, the availability of credit is definitely not.

Traditionally, banks and other lenders would be willing to lend three and a half times your annual salary. For couples, the rule of thumb was that you could borrow two and a half times the annual salary of the highest earner, plus one and a half times the annual salary of the partner with the lower income.

However, lenders are increasingly abandoning this method for a more detailed analysis of your incomings and outgoings. You will be asked to disclose all sources of income (salary, bonuses, interest from savings and investments etc.) and all outgoings (how much you spend on bills, entertainment, groceries, gifts, travel etc.). The bank will then use this information to assess how much you can afford for monthly repayments - and decide how much mortgage you can borrow according to this.

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