What are the considerations?
For those of you who are looking for your first mortgage, here are a few things to consider before you sign on the dotted line.
If you’re not entirely sure what a mortgage is, it’s a loan secured against the value of your property which you will pay off on a regular basis (agreed with the lender) until the property becomes your own. Obtaining a mortgage allows you to purchase a house without having the cash available to do so outright.
Is it the right time for you to get a mortgage?
You need to consider whether this is the right time to get a mortgage. Would you be in a more comfortable position if you were to save for a couple of years first and carry on renting in the meantime? If you don’t feel comfortable with making the jump straightaway, then it’s probably a natural reaction telling you that it would be more realistic and achievable in the future as opposed to right now. Alternatively, you might be set up and ready to press on with securing a mortgage due to your financial situation.
Work out monthly payments
Whilst on the subject of finances, it’s important to work out how much you will be required to pay back on a monthly basis. Once you have this figure, factor it in with your other monthly costs to ensure you can still afford to live comfortably. If it’s becoming clear that you won’t have a great deal left after food, fuel and other essential cots, then it might be wise to save for a little longer before committing.
This is where the repayment period will come into account, because if you are repaying over a longer period, the premiums will be lower but the interest is going to be more over the same timeframe.
Considering stamp duty
For those buying for the first time, you need to account for stamp duty when weighing up your initial outlay. This extra cost will come into play if the property is worth more than £250,000, so find out how much you will be required to pay and factor this in too. It’s best to get an accurate overview first before reaching any decisions because if you didn’t take this on board it could result in you taking on more cost than you can comfortably afford to cover.
The most important thing to remember is not to rush into purchasing a home or securing a mortgage. Sit down and work out all outgoing costs involved first beforehand. If you are comfortable, even in a worst case scenario, then it’s probably a good time to set up your mortgage and begin paying your initial repayments thereafter.