How Should I Pay for My First Home?
For many, the purchase of a first house is the largest financial commitment they’ll make. Apart from the significant expense, the whole process can be nerve-wracking and frustrating, not to mention incredibly time-consuming. Entering the market in the wake of a double-dip recession only makes it harder to obtain the cheap, easy mortgages which were once the mainstay of Britain’s property finance industry.
However, if you change your perspective a little, you’ll see that this dearth of cheap credit is a positive thing for you in the long run. Now, instead of shelling out for something you simply can’t afford, you must take a long, hard look at the reality of your financial situation and how it applies to the housing market. The first step is to find out your credit rating; to get a free credit report visit annualcreditreport.com
Once you’ve established that, ask yourself whether you want to go to the limits of the credit available to you, or whether to adopt a more conservative approach. During the peak of the property boom in the mid-noughties, it was common for lenders to give three-and-a-half times the main breadwinner’s income for a mortgage, or two-and-a-half times the joint income. Recently, these affordability measures have been reduced – sometimes drastically. Now you probably need to put down a larger deposit and show proof of a strong credit history.
Even if you manage to get a little extra than you imagined, it’s not necessarily wise to do so. Keep yourself in check, as interest rates can go up at any time. Remember, you can always upgrade to a bigger house in future if your financial situation improves.
If you go for a fixed rate term, the added security you gain is offset by the time limit imposed. Rates could well go up in the meantime. So approach a house purchase and mortgage with the degree of modesty that such an immense investment calls for. Your financial security is more important than that huge garden.
Remember, seek independent financial advice before making any agreement with a bank or mortgage lender.