Managing personal finances can be tough, sometimes it’s even difficult to know where they will stand next month. Planning for the future is important when looking to secure a mortgage. Responsible money management and effective budgeting can help you on your way to buying your first property.
What mortgage can you afford?
When looking to apply for a mortgage it’s best to calculate what you can afford to borrow. Lenders will look at your monthly income and outgoings to decide on the amount they are prepared to lend.
Lenders look at your outgoings based on utility bills, current credit agreements, and estimates of living costs. They may ask you to complete a planner that lays out all your monthly outgoings to ensure you won’t be putting undue pressure on your finances.
Remember, the cost of buying a property isn’t limited to mortgage repayments. Mortgages come with a number of associated costs, including booking and arrangement fees. Often these will be added to the loan, but can end up costing you more in the long run due to the additional interest added.
Your deposit, valuation and legal fees, and Stamp Duty are also significant costs to consider.
How lenders assess mortgage applicants
When you apply for a mortgage the lender will review the level of payments you can afford. In addition to assessing your income, mortgage lenders will also run an affordability check.
This assessment, introduced by the Mortgage Market Review, will consider the possible impact of changes in interest rates and expected changes to your lifestyle. For example, if you plan to take a break from working, this will restrict the amount available for you to borrow as you may not be able to afford the same repayments as if you were working.
Credit scores and mortgages
Lenders may also review your credit report to check if you’ve managed your money responsibly in the past. A poor credit history may hinder your ability to secure a mortgage, so it is important to be proactive about repairing your credit score by making responsible financial decisions.
Consider aqua which looks at each individual application to see if we can give you the credit card you need and can afford, to set you on the road to good credit.
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