How Much Can I Borrow?
When they have their minds set on accomplishing a goal, people sometimes tend to use every available option in order to see their dream materialise, and deal with the consequences later. Buying a home is no exception when it comes to such goals, and obtaining the money can take a lot of effort and resourcefulness, from taking a mortgage and/or saving, to taking on various other loans to supplement the mortgage and complete the sum on needs in order to purchase the property. Needless to say, anyone is extremely proud and pleased when managing to get a mortgage and buy the house they desire, and in that joy perhaps disregards the difficulties which might spring up along the way, meaning the actual repayment.
Affordability is not a concept affecting those who have to pay for a property at a precise moment in time, but also those who choose to pay gradually, through a mortgage. Your borrowing limit depends on many variables. Present day methods of evaluating whether someone will be able to repay the loan usually entail multiplying one’s income, as most mortgage providers allow applicants to borrow up to three or four times their salary. Yet when the new regulations are officially introduced, mortgage providers will also establish a borrowing limit considering a larger number of factors such as your provable income, your outgoings and the possibility of interest rates going up, which will most likely happen in the future. But that does not mean you have to go for the maximum borrowing limit, as it is imperiously necessary that before you proceed with taking on a mortgage you have a carefully pondered plan, considering all aspects in order to make sure your life will be of good quality one you have purchased your new home. We strongly suggest getting several mortgage estimates from experienced advisers in order to fully understand the cost of arranging and repaying a mortgage.
With regards to your income, it is mandatory that you are confident in its stability; otherwise, if you lose it completely or it is diminished, you will face pressure to supplement the funds as well as the danger of losing your house. Of course, nobody knows what can happen in the future, especially in an economically unstable climate. That is why you might want to consider an income protection insurance policy, which would be very helpful in case you suddenly lost your revenues. If you are working for somebody else, it is worth analyzing how long you are likely to keep working there, what direction that particular company is taking etc. Other personal aspirations are also to be taken into consideration, such as future studying, which is likely to involve its costs, a prospective career change and so on. If you are taking on a mortgage you will need a constant income, therefore such sudden changes will be a risk many wouldn’t like to take. Also, your ability to pay the mortgage will depend on the type of mortgage you have opted for, either a tracker or a fixed rate mortgage, the first entailing the possibility of a raise in interest rates at any time, so you need to evaluate matters from that point of view as well.
And if you are working for yourself, it is mandatory that you correctly evaluate your business and the revenues it will generate in the future, your other business plans and their chances of success, how much capital you will need to put into them in the future and so forth. If you are just starting your journey into the tricky entrepreneurial world, it might be sensible to wait and see how it goes rather than taking on a considerable mortgage, which is a very serious commitment, before you have definite proof of the viability of your new business. Another factor establishing your borrowing limit and in fact determining whether or not you get a mortgage is your ability to prove your income, which is relatively easy if you are employed. If you are self-employed, however, things get a bit difficult, as you will need to have a record of business transactions for the past three years, which might be difficult to obtain, depending on your past and present activity.
One of the first things to think about, aside from the mortgage itself, is the best way to obtain the rest of the money you will need in order to buy the property, as well as the mortgage deposit. The optimal way is to save up, but that is not always possible in today’s frantic world, where everything you earn usually goes
back out very soon and your earnings go towards affording your property, bills etc. So if you do get a loan from another creditor than your mortgage provider – as 100% mortgages are hardly accessible to everyone – you need to consider the fact that the bigger your mortgage, the bigger your loan will be, and it’s worth having a detailed plan with regards to repaying it.
Another key factor resides in the condition of the house you are buying and your wishes to fix or redecorate it, to fit it with various necessary appliances and whatever else you have in mind – all that will, of course, involve more money. You surely wouldn’t want to buy a new house where you wouldn’t have all the propitious conditions for an agreeable lifestyle; after all it is not the size of the house that matters, as much as the better existence it provides. Whilst an older house might need fixing and adapting to modern needs, a newly built house might not have all the necessary fittings in terms of piping, electricity etc. What is more, if people can do without certain appliances or furniture for a while, or even do some DIY work around the house to avoid contracting specialised workers (although that can be dangerous sometimes), you need to consider major works such as roof repairs, which you can never leave to divine providence. And on top of that, there will be bills to pay for your essentials – namely water, electricity, gas for heating etc. and these bills are likely to be larger than in your previous home, if you have stepped up on the property ladder. Moreover, if the heating system in your new home depends on a different type of fuel than gas, such as oil, you will need to fill your oil tank as well, for a considerable period of time, and that is not exactly cheap. Another feature you should consider is the council tax of the house you intend to buy with the aid of a mortgage, as it will, of course, pile upon the rest of the costs you cannot avoid when purchasing a new property.
Needless to say, your personal plans are a vital part of the equation, for instance the number of people you will have to support while paying your mortgage. People usually opt for a mortgage, thus a home of their own if they didn’t have any or a better, usually larger house if they are planning on starting their own family, which will involve higher living costs. If you live with your spouse or partner, you should discuss matters such as having children beforehand, and assess your possibilities in terms of affordability in order to decide how much to borrow. It often occurs that people are forced by circumstances to postpone important decisions such as having a child after realizing they took on a mortgage too sizeable for a reassuringly comfortable lifestyle, or even worse, due to financial difficulties, feel like they have no option but to terminate a pregnancy, which is a great tragedy considering this is all due to taking on too many debts, of their own free will. The stress of not being able to earn more money and being stuck in an endless vicious cycle of overstretching and debt has been known to cause psychological problems such as depression, the inability to cope with debt or repossession sometimes leading to suicide, which is an extreme action but unfortunately not uncommon when people realise that they had been struggling for years in order to pay for a property now being repossessed. Also, these problems have been known to put considerable pressure on marriages and relationships and have managed to split many couples, especially since the lack of money sometimes creates disputes over who earns the most, who spends unnecessarily etc. The gravity of the situation increases when creditors start pressuring you, and when matters are delegated to debt collecting companies, their attitude towards your family will most likely border on harassment. A new home can be very important in someone’s life, or in the life of a whole family, but there are more significant aspects to consider, such as your health and the wellbeing of your family, which consists of more than a roof over their heads, but a series of material and emotional aspects as well. That is why borrowing too much if there is a risk of not being able to cope is in no way advisable, even if you are a resourceful person usually capable of handling such matters toward a satisfactory end.Source: www.mortgagequotes.co.uk