Taking out a first mortgage on real property can be a massive commitment so here are 10 important things to consider.
- Can you afford the monthly cost, using a mortgage calculator will give you an indication to what the monthly commitment to the lender will be dependent on what type of mortgage you go for.
- Is your income fairly guaranteed and safe for a long period of time? It may be unwise to commit to a first mortgage if you are under the threat of redundancy or only have a few years left before retirement.
- Have you thought of everything? Buying real property also entails getting local authority searches, mining searches, research into the title of the property and all of this costs money which will need to be paid up front, some of it before the purchase of the property goes through. Make sure you research the other costs involved.
- Can you afford to live? Whilst on your paper budget you have plenty of cash left at the end of the month, is this enough for you to live on? Will you have to drop your daily Costa or is this a sacrifice you are willing to make. Does the fear of not having a holiday for a few years leave you pining at ‘Wish you Were Here’ or smug knowing that you will own your own home?
- How much do you earn? The amount you can borrow is linked to your annual salary. This is usually 4 times your salary, which is easy for employed people to prove. This may be harder for self employed people who normally try to get their earning as low as possible to reduce tax liability.
- Consider your attitude to risk, do you want the safety of a fixed rate or the variability of a tracker?
- Do you want to use your savings to pay off the mortgage at the end of the 25 years or do you want to reduce the capital over the period of the loan?
- How long do you want to be tied to the same provider, longer tie-ins may give greater protection from inflation but rates may be higher.
- Do not take all the products offered from your advisor, shop around, you may get a better deal.
- Do not forget to save for your deposit!