With the rising costs of housing the prospect of buying a home with only one income may seem unlikely. However, by preparing carefully you can give yourself the best possible chance of becoming the sole owner of a property. In this blog we share some tips on getting a mortgage on your own.
- Clearing debt
One of the factors a mortgage lender will look at when assessing affordability of the repayments is your regular monthly expenditure. Take a close look at your outgoings. Are there any payments to credit cards or store accounts that you could reduce or eliminate? Are there any subscriptions you could live without? Reducing your outgoings will improve your eligibility.
- Get saving!
The bigger the deposit you can put towards a house, the better prospect you will be to potential lenders. Saving can feel like a drag when there are so many temptations to spend money, but the larger the deposit you can pay on a property the better.
A key metric used by lenders is the loan-to-value (LTV) ratio of a property. Having a large deposit lowers your LTV. For example, if a property is valued at £200,000, and you pay a deposit of £75,000, you would need to borrow £125,000, and your LTV would be 125,000/200,000 x 100 (62.5%). If however, you could only afford a deposit of £50,000 your LTV would be 150,000/200,000 x 100 (75%). The higher the LTV, the higher the risk for lenders and the fewer deals you will be eligible for. Saving for a substantial deposit increases the options available and can save you money in the long run.
- Be realistic
It’s easy to fall in love with a property and get carried away, but how affordable is it really? Think carefully about your budget and what you can afford without pushing yourself to the limit financially. As well as other costs involved in house buying such as stamp duty and legal fees, unexpected bills have a nasty habit of cropping up. Planning to get a deal for the maximum amount you can afford to borrow would leave you unprepared for the unexpected.
- Do your homework and seek advice
Speaking to a mortgage broker will help you to consider your options and plan for your purchase, but it’s a good idea to do your own research in advance so you are aware of the types of mortgage product available and what might be most appropriate in your circumstances.
You should also talk to your broker about your insurance needs, particularly income protection. When you are buying a property with only one income, it’s crucial to have protection in place to help you to continue to make repayments in the event of changes to your employment status.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.