Mortgage guide

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There are a number of factors to consider when it comes to choosing a home to buy - some of them practical and some are more subjective than that. You need to be able to trust both your head and your heart. It is after all the biggest purchase that most people make in their lifetime.

Affordability

The main factor is affordability. As a rule of thumb, think of borrowing around three times your gross annual salary. Couples can generally borrow three times the larger salary plus one times the smaller, or two and a half times the joint salary. You may be able to borrow more - particularly in these low interest times but there is no point in buying the house of your dreams if you overstretch yourselves. If the market collapses you may find yourself in the situation that you have a property that you can't afford and no-one wants to buy.

You might also want to consider your domestic circumstances - for example if you have a family and one person will be staying at home to look after the child can you still afford to pay the mortgage on the salary of just one breadwinner.

Your repayments should not be more than 35-40% of your net monthly income. If it is more than this you are in danger from borrowing too much. Also, as we are heading into troubled times - if a large part of your salary is made up from bonuses you should make sure that you can still afford your mortgage if your bonus is much smaller than in previous years.

Other financial aspects of buying a home

You will also need to have enough cash to pay for all the extras that surround home buying; solicitor's fees, stamp duty, removal costs and so on.

Stamp duty

Stamp duty must be paid on all property transactions over £60,000 - except in the most disadvantaged areas of the UK where the level is £150,000. This follows a change made in the 2001 Budget. The Inland Revenue website lists all the areas that qualify. Click here to read it.