April 5, 2021
Owning a home can be your big dream, but you must be very careful about this move because if you buy a house that you cannot afford, you will be in deep water.
This is a very big investment; you will be tied with your mortgage for a long period, and keeping up with repayments with a lot of ups and downs in financial life is quite daunting.
If you have decided to buy a house, you need to take stock of your finances to ensure that you will not break. If you fail to settle your debt taken on against your house, you will lose your property and ding your credit score, restricting your chances of borrowing money at affordable interest rates. If you are in a dilemma, you should take into account the following factors:
Your current state of finances
A rule of thumb says that you should have at least 20% of the value of your home as a down payment. However, various lenders can sign off on your mortgage even if you have a 5% deposit. However, the larger the down payment, the lower the mortgage will be.
It means you will not have much of your money going into interest payments. It may not be a good idea to take out a mortgage with very little down payment.
If you can arrange a larger deposit, you should postpone it. Next, you need to decide if you will easily be able to pay down the debt. You will have to determine which deals suits you most carefully.
Your mortgage will be on a fixed interest rate for the first two to five years, and then your lender will switch you to a standard variable rate. Although you do not know about the exact futuristic financial condition, you can find out whether you will be able to afford the mortgage payments.
By using an online loan calculator, you can get an estimate of monthly payments. Note that the online calculator cannot tell you the exact figure. However, they will likely be higher than the estimation because of processing fees.
Your futuristic financial condition
Do not forget to take into account the state of your future expenses. Life is unexpected, and it can throw a curveball at any time. Have you thought about how you will manage your mortgage payments if you lose your job?
Financial emergencies can come up at any time. You must have a backup. When you lose your job, you will have to dip into your savings to meet regular expenses. You may also need to take out 24-hour loans in Ireland.
Along with such debts, it can be quite trickier to keep up with mortgage repayments. This is why it is recommended that you should consider your future expenses. If you do not have a backup plan, you should put off the idea of buying a house.
Your credit score
Needless to say, your credit score must be impressive if you want to get a loan at attractive interest rates. The same goes with a mortgage too.
Getting a mortgage with a bad credit rating is not possible from banks, but there are a few online lenders who can allow you to borrow money to buy a house despite a bad credit rating.
If your credit score is not up to par, you will likely end up getting a mortgage at high interest rates even though you arrange a larger deposit site. Now it may not be an ideal time to buy a house if your credit report is not up to scratch.
Get a copy of your credit report from credit reference agencies to ensure that it does not consist of a default that you do not recognize. Pay off all your current debts on time so they can give a boost to your credit score.
If it still reflects a poor credit rating, you should try to take out an instalment loan and pay it down on time. Such short term loans in Ireland can improve your credit rating.
Consider maintenance and repair work.
If you have decided to buy a house, do not forget to consider other expenses such as yard cleaning, renovation, and the like.
This all brings a lot of responsibility and additional expenses. Make sure that you can easily afford such expenses.
Buying a house is not that easy. You will have to evaluate your current financial expenses as well as the stability of future finances. Make sure that you have a good credit score and you have arranged a larger deposit size.
Otherwise, you will not be able to have a mortgage signed off on or if yes, you will have to pay very high-interest rates. If you have made all these arrangements, you can buy a house.