For most people, buying their first home will be their biggest financial commitment. It can be extremely nerve-wracking – not to mention expensive, time-consuming and, at times, frustrating. Things are harder than ever now, with economic doom making cheap and easy mortgages a thing of the past. This should be viewed as a positive – instead of buying something you simply can’t afford, you are now forced to take a realistic look at the market and gather all the information you can before committing to a mortgage.
One of the key questions is: how much can you spend? This should depend on how much you can afford. Traditionally, you could borrow around three-and-a-half times the main earner’s income (before tax) or two-and-a-half times the joint income. In recent years, lenders adjusted their ‘affordability’ measures to allow more and more people to buy expensive houses, culminating in the property boom peak of 2006. That was before the flood, of course, and the borrowing criteria these days are substantially tougher. Lenders may want a larger deposit and proof of credit history.
Even if you can prize more than you anticipate out of a mortgage lender, it’s vital that you keep yourself in check and avoid going overboard, just because you can. Remember, interest rates can go up at anytime – the fact that they’ve been at a historic low recently makes an increase a certainty.
Even if you opt for fixed rates, the added security has a time limit, and rates may end up higher at the end of the fixed term. Whatever you do, try to approach a house purchase and mortgage with a degree of modesty – remember, if you underestimate what you can afford, you can always upgrade to a bigger house in a few years when your security is assured.
Remember, always use a reputable mortgage provider – don’t just look out for the seemingly-attractive deal. This is a long-term investment, and, although no bank is 100% safe, a larger firm will be more secure. Try Santander mortgages – click the link for more information.
