Taking on your first mortgage will be the greatest financial decision of your life, and will have an impact on your finances for a long time to come. Before you decide to leave the nest or your rented accommodation, you need to make sure you are aware of the commitments and responsibilities that come with getting on the property ladder. While you will be able to build long term assets, a part of your income will be tied up for decades. To help you make the right decision, we have provided a few tips below.
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1. Choose Your Location Carefully
Once you start thinking about getting your own place, you have to research the areas you can afford. There is no point stretching beyond your means, or you will end up getting yourself into trouble. Be realistic about your location. You cannot move in to a 5-bedroom, 3-bathroom mansion, unless you have a higher executive salary. Start small and make sure you can afford the repayments. Use an online mortgage calculator to get an estimate of the cost of getting a house on a loan.
2. Get Your Finances in Shape
Whether you are living in a rental property or with your parents, you need to make sure that you don’t have too much outstanding debt. Check out your consolidation options and find the right way of managing your credit. You will be more likely to get accepted for a mortgage if you only have one credit account, instead of debt all over the place on credit cards and car finance.
3. Check Your Credit Rating and Compare Rates
Before you would make an application and start planning your move, looking for properties, you must be sure that you are considered creditworthy by banks. The main indicator of whether or not you will be accepted for a mortgage is your credit score. Check it and find ways of improving it. If you live with your parents and are planning on leaving the nest, chances are you have little or no credit history. It might be worth to consider applying for a credit card and making a few payments to build up your score before thinking about mortgages.
4. Carry Out a Reality Check
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You need to be realistic about what you can afford and maintain. Find out exactly how much it will cost you to maintain the property and pay the bills. There are several calculators online that will give you the estimated running cost of the property you have your eyes on. This way, you can budget better and will not stretch yourself too far.
5. Get a Stable Job
It is also important that you get a stable job before you apply for a mortgage. It will not only help you get a mortgage, but also give you a peace of mind that you can make the repayments.
Before you could jump on the property ladder, you need to make sure that your finances are in order, and you can afford to make the repayments for the next few decades.