How much of a mortgage can I afford?

Q Could you tell me what price of house I can afford for ?1,000 a month repayment? I would require a 100% mortgage, if there is such a thing.

PN

A I can't I'm afraid because lenders don't lend on the basis of what you think you can afford in the way of monthly mortgage repayments. Instead they look at a range of things including your annual earnings, the value of the property you want to buy, your other credit commitments (such as credit card debts, overdrafts and personal loans) and your credit history. But, for interest - and assuming you met all the necessary lending criteria - a monthly repayment of ?1,000 would buy you a mortgage of ?145,000 (assuming a 25-year repayment loan with an interest rate of 6.75%).

And yes, there is indeed such a thing as a 100% mortgage - although not all lenders offer them. But even those that do - which include Coventry building society, Direct Line, NatWest mortgage services, the Royal Bank of Scotland and Yorkshire building society - will lend only 100% of their valuation of the property, which can be lower than the asking price.

So on a property with a sale price of ?100,000, for example, but valued by the lender at ?98,000, the biggest loan you'd be able to get would be for ?98,000 and you'd have to find the cash to finance the ?2,000 shortfall (or ask the seller to drop the price).

This might not be a problem if you are aged between 21 and 35 and can produce a degree certificate from a recognised UK university because mortgage loans of 102% of the value of the property are available from Scottish Widows. However, the amount you can borrow is also limited to 3.5 times basic annual salary. So to qualify for a loan of ?100,000 you would have to be earning in the region of ?28,750 a year.

But you also need to pay other costs associated with property purchase which include legal fees, valuation and survey fees and stamp duty (if the property costs more than ?60,000). So on a property costing ?100,000, you could be looking at having to find around ?2,500.