Assess your suitability for taking out a mortgage

Thinking of taking out a mortgage

Are you thinking about taking out a mortgage? 

Are you a young adult looking around for information on how to get a mortgage? 

Keep reading on as I give you a few pointers to consider before making that life commitment that can feel like a struggle but will be worthwhile in the long term. Creating a Personal Budget – Lifestyle saving techniques

Assessing your eligibility to buy

Buying a home isn’t something to consider lightly; it is a big financial commitment that must be thought through carefully. Before deciding whether taking a mortgage out is the right option for you at this moment in time, you need to consider looking at whether you can afford a mortgage based on your income to get a rough idea of what you can afford.

Ask yourself …

Am I ready to buy a home?

Do I have enough money to buy a home?
Will I be responsible enough to meet my monthly payments?
Is this the right move for me to make now?

Don’t feel pressured to buy just because family and friends have purchased homes; make sure your reasons are valid for deciding to take out a mortgage.

Go to the House Price Index | Property blog (rightmove.co.uk), where you can get a rough idea of how much properties cost in different regions across the country. 

Deposits for a home continue to be a problem. A 10% deposit needed for taking out a mortgage is 56% of an individuals total gross annual earning. (Nationwide Chief economist, Robert Gardner). However, when has it ever not been a problem, don’t let this put you off getting onto the property ladder once you find that you can meet your mortgage payments. 

There are government schemes like these on All schemes – Own Your Home – Own Your Home that helps first-time buyers access a mortgage with some help. 

Save for a mortgage deposit

An effective way to prepare to save for a mortgage deposit is to create a budgeting plan. Writing down a budgeting plan is a helpful way to keep track of your spending and can help you identify any outgoings that you can stop or try to get a better deal on. It also gives you a clear idea of how much money you have coming in. Check out my article, Creating a Personal Budget – Lifestyle saving techniques where I give more information on how to do this.   

Calculate whether your money can help you attain a mortgage by assessing your eligibility with this income-based calculator.

How do banks or lenders decide on giving you a mortgage?

Mortgage lenders will assess your eligibility based on your income however, it doesn’t just end there. They also look at whether you are creditworthy meaning that you can be relied on to make repayments.

They carry out what is called a Credit Check. Banks are interested in ensuring that you can be relied on to meet your mortgage payments by checking whether you have made consistent payments on other loans you may have taken out or on credit cards used. They do this by checking your credit score through credit score agencies like Experian. You can sign up to credit checking agencies for free and keep track of your score. You can also sign up for a free 14-day trial to get access to a complete credit report that details how you can improve your credit score. This is the company that I used to keep track of my credit score.

Register to vote on the electoral roll and vote.

Mortgages on offer

If you didn’t know previously, there are two types of mortgages.

Repayment Mortgages

Repayment mortgages mean that you will be paying off some of the mortgage and the interest on the mortgage every month. An allotted mortgage term of 25 years or more; is set, and after this period is up, you would have paid the entire loan.

Interest-only mortgage

An Interest-only mortgage is when you only pay the interest each month. At the end of the mortgage term of 25 years or more, you will repay the entire amount on the mortgage. But, you will also put money in an investment scheme each month to ensure you can cover the final repayments. This type of mortgage will suit first-time buyers because you might not initially have a substantial amount of money.

Other costs you need to take into account

Interest Rates

Borrowing money also comes with additional charges. Paying interest on what you borrow where the interest can rise or go down. Therefore you need to ensure that your salary is enough to cover these payments. 

Stamp Duty costs which is a tax applied by the government which varies. So if you want to purchase a property for up to £300,000 as a first-time buyer, you will not have to pay any stamp duty. Once you know the price of the properties in the areas you are looking to buy you can calculate how much stamp duty you will need to pay Stamp duty calculator and rates – Which?

Mortgage arrangement – you might be charged a fee from the bank because they arranged your mortgage

Solicitor’s fee – Solicitors either charge a set fee or by the hour.

Surveyor costs involve getting a surveyor to survey the property to ensure it is in good condition.

Removal costs

Finally, speak to a mortgage adviser who will provide further advice about how you can increase your chances of getting a mortgage. Find a mortgage broker registered with FSA (Financial Service Authority) by looking at the mortgage brokers details on their website. FSA are the governing body for the financial services industry in the UK, protecting consumers from unauthorised financial advisers.

I hope this article has given you a basis to go by when deciding to take out a mortgage. You might also like to read this article – Buying A New Home? Read this guide first

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