Can any of you guys tell me what is the math behind the ammount of money you can borrow when looking to purchase a new house or flat?

Normally the practice is that the annual amount(principal+interest),you return back to the financier,  should not exceed 50% of your household gross income.

sanju123 wrote: Normally the practice is that the annual amount(principal+interest),you return back to the financier,  should not exceed 50% of your household gross income.

I am not sure if 50% of your income set aside for monthly mortgage payment is too high.  Most financial advisers would put the cap at about 30% of household income.

I agree with liowkc that the adviser will probably put it at a lesser amount,but the financier assumes that one has not shown the complete income and hence the 50%.C'mon try to understand the ways of the world!

You are quite right to say that the bank will be willing to lend to the maximum amount but usually it is not advisable for the borrower to borrow to the maximum; affordability is a key consideration.

Borrowing higher amount is one of the ways,people use to convert their black money into white.This, even the financial institutes are aware of.

Based on an individual financial institution, financing usually is at 95% Loan to Value or less depending the property in question.  Based on salary it depends on debt to income ratios and the surplus of monthly funds.  If the surplus of monthly cash is enough or more than the mortgage amount then the loan is a go.