Is buying a home and owning a property of your own on your bucket list? If so, you’re not alone. Whether it be to have a home to raise a family or simply to have independence and freedom, buying a property is something many of us dream of. As we continue into our adult lives, many people will start to think about whether they are ready to take this next step and much of that comes down to being able to afford both a deposit and monthly mortgage repayments. So how can you work out if you can afford to make the move to your own home and what sort of value home will you be able to afford? Keep reading to find out.
How much can I borrow with a mortgage?
As most people will be aware of, when it comes to buying a home, you will pay a deposit of the full home value and then pay back this loan in monthly mortgage payments. The money you can borrow depends on a variety of factors but most commonly your income, credit rating and regular outgoings will be examined. 10% is usually the minimum and average deposit homeowners will put down but of course this can vary depending on the lender and your personal circumstances. If possible, it is best to save as much as you can for a deposit as this will lower your monthly payments and could get you a better deal as you will be deemed a ‘safer investment’ for banks. Buy to let mortgages will typically require a higher deposit and cannot be used in conjunction with any sort of help to buy or first time buyer schemes. Online mortgage calculators can help to give you a rough idea of what you may be able to afford but it is always a good idea to speak to a mortgage advisor as they can give a more precise answer and find the best deals and lender for you.
What additional costs should I be aware of?
Becoming a homeowner for the first time doesn’t just come with the cost of a deposit, there are some additional costs and fees that you should factor into your budget. In Scotland, these are some typical fees that you can expect to pay:
- Solicitor’s fees, in Scotland offers must be carried out by a professional conveyancer
- Mortgage advisor fees
- Buildings insurance on the property
- Land & Building Transaction Tax
Many of these additional costs are of course one off payments so if you can afford to pay these up front you won’t have to worry about them again. You should however consider, things such as factor fees, maintenance and repairs and any furniture you will purchase for your new home into your finances.
What will my payments be each month?
As mentioned, your monthly mortgage payments will most likely be your biggest expenditure each month. If you are used to renting then it’s possible that these payments will be less than what you may pay for rent in some areas so if you can get together the deposit needed to get on the property ladder it is most definitely worth it in the long run. The monthly payments themselves will depend on the length of your term, the annual interest rate and whether it is a fixed rate mortgage. Again, a mortgage advisor can work this out and help you decide how much you would be able to afford.
How do changing interest rates affect payments?
Changing interest rates are one of the most important factors to look out for when it comes to comfortably being able to afford a home. If you opt for a fixed rate mortgage you will not have to worry about changing interest rates until your term is over but you should take them into account if you are considering a variable rate mortgage. You may wonder in that case why anyone would choose such an option but it can result in lower monthly repayments so just make sure to explore all your options before making a decision.
If you are thinking about stepping on to the property ladder and need advice on how much you can afford when buying a home, get in touch with the team today.
