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Can't afford a mortgage? Help is at hand.

Tuesday, 3 January 2012 3:47 PM

By Melanie Taylor from ThinkMoney.com.

For many would-be homeowners, it's hard to see falling house prices as anything but good news. According to Nationwide's House Price Index, the average house price in November 2011 was just over £165,000 – about 11 per cent lower than the £186,000 peak we saw back in October 2007.

After years of watching property values increase much faster than salaries, the dream of homeownership may now seem more realistic, making it particularly frustrating for people who've found a house at a good price – but are finding it hard to get a mortgage.

This doesn't mean all is lost. There may be a number of ways they could improve their chances of getting a mortgage.

Find a cheaper house

The size of mortgage that a bank/building society will offer will depend on various factors, but often, the most important is simply salary. Banks may not offer you a mortgage of the size you're looking for, but the amount they are prepared to offer may be enough to buy a different (but perfectly good) property.

Note: Banks' limits on lending are there to protect borrower and lender alike. Never borrow more than you think you can comfortably afford to repay or you might end up losing the property.

Lay down a bigger deposit

You might not be able to find a mortgage at all unless you can lay down a deposit worth at least a certain percentage of the property's value (in today's housing market, normally at least 10 per cent). If you've saved up (for example) eight per cent, it might be worth thinking about ways of finding that extra two per cent – if you can do this in a way that doesn't jeopardise your financial stability, it could make all the difference.

Note: Mortgage lenders tend to offer better deals to people who can lay down a 25 per cent or 40 per cent deposit. So if you already have a 24 per cent deposit to lay down, finding that final one per cent could give you access to much better deals, seriously reducing your monthly payments as well as the amount you'll pay overall.

Wait

Waiting could give you enough time to save up some money, but that's not all: remember house prices are still coming down in many parts of the country. If you think that applies to the area you're looking in, you could pay less for the property you're looking at today if you wait until next year.

Of course, that's not without risk. For example:

• The price could go up
• Someone else could buy the property
• The mortgage market could change, potentially making it harder to get a mortgage.

Note: Nobody really knows what will happen in 2012. The ongoing Eurozone crisis could easily have an impact on the availability of mortgages, to name just one factor.

If you're worried that you might not be able to afford a mortgage, it's always best to talk to a mortgage adviser about your plans. The factor(s) holding you back could be a lot better by the end of next year – or a lot worse – so it's always good to get a professional's advice.

You can compare mortgage deals or use a mortgage calculator at ThinkMoney.com.

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