Getting a mortgage is not easy in the current climate of expensive
prices and uncertainties surround the housing market and mortgage
industry. These are some suggestions for getting your first mortgage.
1. Don’t worry about Short Term Volatility
One current problem with the housing market is its volatility and
uncertainty. When buying a house thing about the long term. The fact
house prices may fall 5% in the next 12 months, is not necessarily a
reason to avoid buying. House price predictions can be wrong, but, the
main thing is if you are buying a house to live in, you don’t have to
think like a speculator – buying a house is not like buying a share on
the stock market.
Volatility has been a persistent factor in the UK housing market.
2. There is no Harm in Waiting
Having said the above, think it is also worth stating that saving a
deposit for a few years, will definitely help get a better mortgage.
With house prices stagnating or possibly falling, waiting for a couple
of years may help average incomes catch up with house prices. Also
during this time, you can save for a deposit and /or pay off old debts.
If you really want to save money quickly consider living with relatives
who might offer a subsidised rent.
3. Work out a Reasonable budget.
Because house prices are so expensive, it is difficult for first time
buyers to create realistic expectations; there is a temptation to
stretch our budget to be able to afford a desirable area. Setting a
realistic budget is important to get the right balance between buying a
house we are happy to live in, and having a mortgage which doesn’t
overwhelm us. The most important thing is not to exceed our
affordability.
4. There is no shame in downsizing
To get a reasonable mortgage, there is no harm in looking for smaller
properties or houses in less expensive areas. There is no point in
getting a huge mortgage if we then have to spend all our waking hours
saving money to pay off our mortgage. In the future you will have the
opportunity to trade up.
5. Reduce other loans.
Many mortgage companies increasingly look at issues of affordability
in deciding whether to grant a mortgage. Afford ability involves
examining our income, but also looking at existing loans and current
outgoing payments. If we can reduce our expenses and remove debts we
will be in a better position to gain a mortgage and also meet our
mortgage payments. To reduce other loans may need careful planning and
the willingness to reduce unnecessary expenditure.
6. Consider Extending Mortgage Period
People of the older generation, inevitably dislike the idea of
getting a longer mortgage term. In a sense they are correct, getting a
longer mortgage will definitely increase the total cost. If you can pay
off your mortgage quicker you will reduce the total cost of buying a
house quite significantly. However, a 40 year or 50 year mortgage will
reduce your monthly payments and make a mortgage less overbearing. If
you can pay off your mortgage in 10 or 20 years, then definitely do it.
But, if you are an average first time buyer, this is often unrealistic
given the high price of houses. If you have a choice between a 50 year
mortgage and renting for the rest of your life, then you are likely to
be better off buying and taking out a longer mortgage term.
7. Joint Mortgages
Joint and shared mortgage schemes are becoming increasingly popular,
offering a way for people to get on the property ladder by buying with
other people. see: Joint mortgages
8. Understand the different types of Mortgages
If you are new to the mortgage market, you may feel a little
bewildered by the range of mortgages on offer. Different mortgages may
appeal to different people. It helps to take independent financial
advice; but, the advice will be easier to understand if you can
familiarize yourself with the different types of mortgages on offer.
First time buyers should know the benefits of:
- Fixed Rate mortgages – giving certainty in future mortgage payments,
- current account mortgages beneficial to those who have reasonable savings in your current account.
- Repayment vs Interest only. Interest only means your mortgage payments do nothing to reduce capital sum. This is not sustainable unless you can find an alternative way to repay the debt.
- Different types of Mortgages
9. Plan your budget.
If your mortgage payments are going to be higher than your current
outgoings. You will need to place greater importance on budgeting and
controlling spending. Avoid the temptations of spending money
unnecessarily, focus instead on making sure you don’t get into
difficulties making your repayments.
10. Don’t forget a Mortgage isn’t the only Point of Life.
There is a certain pressure to get on the property ladder. But, it
might just be that in our current circumstances it is not possible. For
many renting, can offer an equally good alternative. It would be a
mistake to focus only on earning more money to be able to get a large
mortgage. This limits other aspects of our life.
By Extranoski
No comments:
Post a Comment