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So you’ve decided to buy a property. But exactly how much can you realistically afford? As well as the cost of the house, there are many other expenses to take into consideration when moving. To help you with your sums, here’s a guide to working out how much money you have available to spend and what the costs are likely to be.

Here’s a simple way of calculating what price range you should be focussing on. Just answer the following questions.

(a) What amount will you get from the sale of your current home? (if applicable)
(b) How much are you able to borrow? (see ‘How much should I borrow?’)
(c) How much do you have available in savings or investments?
(d) How much will it cost you to move home? (see ‘What other costs are involved?’)

Then deduct (d) from the total sum of a, b and c. The answer will give you a rough estimate of the kind of price range you can afford

Before you even start looking at properties, you should ideally consult a lender or mortgage advisor as to what your maximum possible loan would be. This will be based on the amount of your deposit and how much you earn each year.

While most banks and building societies will be happy to offer you a loan, the majority of buyers will be required to put down a deposit on the property. It’s advisable to put down a minimum of 5% of the property’s value – the more you can put down, the better. Some lenders charge the borrower a mortgage indemnity guarantee fee when borrowing over 75% of the value of the property. This is a one off fee, which is added to the loan to indemnify the lender against negative equity in the event of repossession.

If you don’t have enough funds for the required deposit, for instance if your house hasn’t sold yet, it’s possible to get a ‘bridging loan’ from your bank, which is repayable on the sale of your property.

Mortgage lenders will usually loan up to three times the amount of your annual income. If you are buying a property as a couple, the amount will increase to either three times the main income plus one year of the secondary income or two and half times the amount of the combined income.

In this instance, calculate which method would allow you to get a higher loan and find a mortgage lender with which you can get a joint income allowance which best suits your circumstances. The lender will then contact your employer to confirm your income, or if you are self-employed you will be asked to supply proof of your income, usually up to two years of accounts

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