When you’ve never owned a property before, it can seem like quite a daunting task to take on a loan of tens of thousands of pounds, the kind of money you probably haven’t seen in your entire life. There’s lot of things to think about, have you saved enough for a deposit? Can you afford the monthly repayments? Do you choose a fixed or variable rate? Everybody will have different worries and different hurdles to get over before they can decide if, when, and how they get their first mortgage.
The changes in the way money is lent to home buyers has meant that once again people have to put down a deposit on a property if they wish to obtain a mortgage. Some people may have their heart set on buying a property sooner rather than later and not want to save hard for years before they can. There are other options available though. If your income is easily sufficient to manage the repayments on the mortgage you seek, you could look to take out a personal unsecured loan to use as your deposit. This loan however, will carry a much higher interest rate, and should only be used as a last resort if you are unable to raise money elsewhere and advice should be sought before applying for a personal loan to ensure you don’t get one, only to find out you can’t get the mortgage you wanted and are stuck with it.
If you’ve managed to save enough for your deposit, maybe you’re worried about having such high outgoings and how it will affect your standard of living. Maybe you want to get on the property ladder, but can’t face seeing your disposable income drop. You could consider having a lodger in your home. You can receive upto £4,250 per year from a lodger in your own home tax free, which would help you with your costs. You need to think about how you go about finding a lodger though, you may not like the thought of a stranger living in your home or maybe you don’t want somebody you already know with you all day every day, stepping on your toes.
So do you take out a fixed or variable rate mortgage? It can be tempting to see the difference in repayments and jump straight for a variable rate, but although it would be nice at first having the extra cash each month to spend on yourself, how would you feel if interest rates rose and you found yourself unable to meet your commitments. With the Bank of England Base rate set at 0.5%, there’s not much further down it can go, but there’s a long way up!
There’s no one plan which everybody should follow, because were all different and it is worth contacting an Independent Financial Adviser who specialises in mortgages to help you obtain the mortgage that is most suited to your needs. Kieron Bassett Financial Services has two Independent Financial Advisers. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.
Jason Hinde CertPFS