What determines the size of mortgage you get and how you pay it off?

How do you switch a mortgage from property to property?

There are generally two things will determine how much mortgage you get:

1. Obviously, how much the property you want to buy is. If it’s £100,000 and you have £10,000 yourself then you’ll need a mortgage of £90,000. Typically, most lenders will only lend you a maximum of 95% of the property value (i.e. £95,000 in the example above) but some are 99%, some 100% but expect to have to pay them extra for this.

2. How much you can ‘afford’. Most lenders will only let you borrow a maximum of 4 times your yearly salary. i.e. if you earn £20,000 a year before tax then they probably will not want to lend you any more than £80,000. If you are getting a joint mortgage with someone else then it’s usually 2.5 times your joint salary. (i.e. you £20,000, other person £15,000, total = £35,000 so maximum mortgage = £87,500)

You generally pay it off in monthly repayments spanning many years (typically 25 years). All this time the amount you borrow is accruing interest so obviously if you can pay it off sooner then it will save you money.

When you ‘switch’ a mortgage, the best way to think of it is you sell one house, and pay off your mortgage, and then just take out another mortgage for the next house.


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