Taking on a mortgage is a really big step. All loans should be considered thoroughly but a mortgage is usually a much longer term loan and for much more money. This means that you need to think a lot harder about it compared with other forms of borrowing. There are many things to consider in order to consider whether you are ready and a few are discussed here.
Is your deposit enough?
For most mortgages you will need to save up some money for a deposit. The amount will vary as it will need to be a percentage of the asking price of the property. This tends to average around ten percent but can vary quite a bit. The more deposit you put down, the lower the amount of money you will need to borrow for the loan. This will mean that the loan will be cheaper and you might be able to pay it off more quickly and will pay less interest on it. If you can get a higher deposit then this will keep your loan even lower. However, if you save more of a deposit, it can be tempting to go fir a more expensive property so you need to be careful and make sure that you do not go for something that is dearer than you can afford.
Can you afford the repayments?
It is therefore really important to make sure that you are able to afford the repayments that you will need to make. The lender will check your bank statements to make sure that you will have enough money, but it is important for you to check as well. It is important to make sure that you know for sure that you will always have the money that you need to cover the repayments. Think about what might happen in the future as well as your current situation and whether you think that you will always be able to manage. Hopefully your pay will increase and the payments will become more affordable. However, it is worth considering what might happen if interest rates go up and your pay does not and how you might manage, especially if your family increases in size or your salary goes down.
Do you have a secure job?
Job security is not something that many people have these days. However, there are still some jobs that are more secure than others. Therefore it is worth thinking about whether you feel that your job will be able to provide for you, for a significant amount of time. Think about how well the company that you work for us doing and how well they might do in the future. Consider whether your role will always be needed and if not, whether you will be able to move to another job within the organisation or whether you have transferable skills that you could use to move to a different company. You will need to make sure that you always have a good enough income so that you can afford those mortgage repayments.
Are you likely to move house?
It is worth thinking about whether you really want to have a home in the same location for a significant period of time. Of course, you can sell your home before you have completely finished paying for it, but it can be tricky within a few years of having the house. This is because the value of the home may go down rather than up. If this happens the amount you borrowed will be more than the value of the home and it could make changing the mortgage to a new property difficult.
Is the property likely to increase in value?
It is therefore worth thinking about whether the property is likely to increase in value. This can be hard to judge in the short term as the whole of the housing market could go down in value for some reason. However, it can be a bit easier to judge whether the specific property you are buying or the area it is in might go down in value. Make sure that you have a good survey done on the property so that you are aware of any potential problems with it. Think about whether you feel the house will continue to be appealing based on the current market trends as well. This can be tricky but it is worth thinking about if you can. Consider too whether the area seems to be up and coming or whether it is in decline. This could tell you something about the potential house price increase too. If the area is improving then it will get more desirable and this will mean that the house prices will increase but if the area is in decline then the house prices will fall.