1. DO I ACTUALLY WANT ONE?
Just as wanting to buy doesn’t mean you can, being able to buy doesn’t mean you should. We all know how much Brits LOVE home ownership, but here are some things to think about before you mortgage up…
Perks Of Renting
Financial Flexibility No Surprises You could move to Bali and You don’t need to worry about become a yogi in less than the cost of the boiler breaking 1 month. 👇 or the ceiling falling in.
Breakups happen - with your partner and housemates. Renters can vacate smoothly… if you own together, it’s a different story.
Reasons To Think Before You Buy
You plan on starting a business
You're thinking about switching jobs and taking a pay cut
You're not sure what your plans are or where you'll be in the next 5 years
You might relocate with work
Your job is under threat
What about timing the market?
House prices do go up and down but historically have been a good investment in the long run..
2. CAN I AFFORD ONE?
...if home ownership really is the goal, you’re going to need a mortgage and post 2008 crisis, this is trickier than it once was. You have two things to think about:
You can borrow up to 4.5x your salary. So let’s say you combined income (if you’re buying with someone) is £50,000. This means you could borrow up to £225,000.
A lump sum, usually 5%-20% of the cost of the home. Say the property you want to buy is £300,000, you’d need a £75,000 deposit (25%).
There's no need to do the maths yourself, check out the 'Mortgage Affordability Calculator'
BUT IT DEPENDS.. the 4.5x loan-to-income ratio is the MAXIMUM amount you can borrow.
THE AFFORDABILITY ASSESSMENT
Which looks at things like your
- fixed outgoings (e.g. childcare, student loan).
Lenders will also 'stress test' your finances, looking at the impact of...
- Having a baby
- Interest rate changes
THE LTV RATIO
- is the ratio between the value of your property and mortgage.The LOWER the LTV, the BETTER the mortgage rate. In other words, the more you save and the less you borrow, the cheaper the mortgage.
Heard horror stories about self-employment making home ownership an impossibility?
JUST NOT TRUE
Most lenders offer mortgages if:
You've been trading for at least three years
You have two years of accounts or tax returns available
What lenders look at…
Sole traders and partnerships - net profits as income
Limited companies - salary and dividends (sometimes salary and net profit of the company)
Top Tip: Definitely speak to a mortgage advisor for the best deal..
CAN YOU GET HELP?
If doing the sums makes home ownership feel like a distant dream or if you're in need of a little boost, what about the following…
Help to Buy equity loan Help to Buy: ISA
Right to Buy Lifetime ISA
FAMILY AND FRIENDS
Guarantor mortgage Buy with friends/family
Bank of Mum & Dad
4. DO I HAVE MY FINANCES IN CHECK?
You know how much you need to save for your deposit and how long it'll take you
You've set up a budget and have automated your savings
You've checked your credit score and, if needed, are working on boosting it
YOU'RE ONE STEP CLOSER TO HOME OWNERSHIP