Buying a house and taking out a mortgage is a significant financial commitment that requires careful consideration. With the help of our partners at L&C, one of the largest whole-of-market mortgage brokers in the UK, we’ve compiled a list of important questions you should ask yourself to help you make an informed decision…
How much can I comfortably afford to pay each month?
A mortgage is a long-term commitment so determining an affordable monthly payment is crucial. You should only borrow what you can realistically repay each month over the repayment period which is usually the next 25 years or more.
Consider your budget, account for discretionary spending, anticipate potential mortgage payment increases, and plan for emergencies. Overstretching your budget can lead to financial difficulties and the risk of losing your home through repossession.
What’s a realistic savings goal for my deposit?
Set a realistic savings goal based on your current income and living expenses. Whilst a larger deposit usually results in a better mortgage deal, it’s essential to balance this with rising house prices.
Once you’ve worked out how much you’d like to save, depending on the timeframe you’d like to work towards, calculate the amount you need to save each month to reach your target using a savings calculator so you can plan ahead and manage your outgoings while you’re saving.
Additionally, remember to consider other costs associated with getting a mortgage like the fee for your mortgage broker for example.
Can someone guarantee my mortgage?
If your finances are tight, having a guarantor, typically a parent or close family member, can help you secure a loan. In this case, you’re responsible for the repayments, but your guarantor becomes jointly liable and will need to pay if you fall behind.
Ensure your guarantor seeks independent legal advice to fully understand their commitment and responsibilities.
Am I eligible for government schemes?
Explore government schemes designed to assist homebuyers facing challenges, including first-time buyers or those in need of a larger mortgage. For example, the Shared Ownership scheme caters to buyers who can’t afford the entire deposit and mortgage payments. Research these schemes to determine if you qualify and if they align with your needs.
Are fixed monthly payments or a lower interest rate more beneficial?
Choosing between fixed monthly payments and a lower interest rate depends on your individual circumstances. You might choose to go for a fixed-rate mortgage if you value predictability and want to know your exact monthly payment over the next few years, protecting yourself from potential rate increases.
On the other hand, if you’re confident in your ability to handle higher payments in case of rate hikes, a mortgage with a lower interest rate may be advantageous, especially if rates are expected to decrease.
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.