Deposits

The next thing to think about is the deposit you'll need to buy the house. Usually a mortgage lender will loan you up to 80% of the value of the property which means you'll have to come with the rest. If you want to buy a house worth $400,000, you'll need a deposit of $80,000! Do you have any savings that you can use? Can you raise the money by other means, if you haven't? Can your parents help?

There are certainly lenders who will give you a 97% or 100% mortgage but you're likely to pay over the odds on the interest rate because you'd clearly be a bigger risk. After all, if you default on the mortgage, they'll want to be sure that they can get their money back in full.

The larger the deposit you put down, the lower the rate of interest you are likely to get. A larger deposit also reduces the risk of you going into "negative equity". This is the nasty situation when the value of your house falls to below that of your mortgage. This makes it difficult to move house as if you sell up the proceeds won't cover the mortgage, and you would need to find additional funds from elsewhere.