This is a collaborative post with Mortgage Calculator U.K., but all thoughts are my own.
Buying a home can be a really exciting, but daunting process. How do you even know if you’re ready for a mortgage? There are so many questions; so much on the line, and even more to think about. Thinking about a mortgage can feel overwhelming and extremely stressful.
Because of this, I wanted to share my thoughts as I gear up to sell my current home, to buy a larger home. Just as there was when it comes to buying my first home, there is a lot to think about. I wanted to share some of the things which helped me get in the best position to buy. As well as some of the tools I’ve used. So you can be ready for a mortgage as best as you can.
Having a good credit rating is half of the battle, the deposit is another slice, and having all the right information is the rest.
Buying In The UK
Due to COVID-19, the UK slashing stamp duty with it only returning to normal in October 2021. Because of this, house prices have unfortunately increased, meaning it is even more difficult to get on the property ladder and even harder to upgrade to a larger home. The Guardian has recently discussed how this rise may continue for at least five years. Disappointingly, this affects younger people who are aiming to buy their forever home.
At present in the UK, house prices are at their highest since 2007. Which.co.uk recently posted that provisional data from HMRC showed that over 117,860 house sales went through in April, which is a staggering number if you think about it. Asking prices have risen post-COVID as well as sold prices. Because of this, unfortunately, sellers aren’t willing to bargain as much as they have done previously. All of this also means that with demand being at an all-time high, the house prices will remain just as high to match it, which makes it even more of a challenge than normal.
This is why it’s even more important to purchase a home when you are comfortable. Whether it’s your first, second or an upgrade. Rushing into such a large purchase can add more stress than it’s worth. Trust me, there’s enough stress when buying as it is.
Check Out House Prices
The first thing to do is to check out the house prices in your area or the area you’re eyeing up. This is actually one of my favourite things to do. Especially in the area I currently own a home in. I currently use Rightmoves House Price, and I’ve chosen my wider area rather than my street to show you what I mean. The checker does allow you to narrow down by year and street, as well as look at the wider area.
The reason behind doing this is so you can ensure you can afford that area. You can also see what the growth in house prices has been in the area you are viewing houses in. Being armed with information can actually pay off. When you’re offering less than the asking price, you can argue houses in that area have gone for the price you’re suggesting. It may not save you much, but every little helps when you’re buying something so expensive.
Look At Why You Want To Move
For each of us, we’ll have a different reason for moving. For myself and my husband, we’ve simply outgrown the home we are in and wish for certain qualities we don’t currently have. He would like a drive, and I would really love a space I can class as my office. Because, due to the pandemic, I spend more time working from home than I did so beforehand. Many people are in this position, turning spare bedrooms or corners of rooms into an office.
There are also larger, more future based decisions impacting the reason we wish to move. Such as starting a family and limited storage.
The reason it’s important to assess this before you move is so you can get a clear idea of what type and size of house you’ll be aiming for. From this, and armed with the above house price information, you can begin to assess what deposit you’ll need or if the deposit you have is enough.
I personally love using a mortgage calculator such as https://www.mortgagecalculator.uk to assess what deposit I’d need and what I’d be looking at paying. It also helps me to think about whether to lower the mortgage years; whether to offer a higher deposit. I can play around until I find a mortgage I’d be happy with paying monthly.
Assess The Mortgage You Can Afford
Before you even begin imagining what kind of home you’d love, the area or the furniture you’d buy, you need to look at what you earn and can afford. This needs to be realistic, and it is something the bank you will go to will also look at. Sitting down to look at the mortgage calculator we just used, https://www.mortgagecalculator.uk, we can help you better understand what you can afford and what position you’re in to afford a house.
You will also need to consider what monthly mortgage payment you’ll be comfortable with. Your finances may allow you to purchase a larger home, but the price of that mortgage monthly needs to be something you’re comfortable with also.
Here is an example of this using some information for what I’m aiming for in my next home. That monthly amount is quite high, so even if I can afford a house at that price, it’s a lot to be paying out. Something I’m not comfortable with.
However, this second link will take you to a more realistic monthly payment for myself. I also have to weight up that I do a mix of contracted work and freelance work. I need to be able to still pay this mortgage if that dries up. This is why using this MortgageCalculator is helpful.
Another bonus to using MortgageCalculator is like I’ve just shown in this post, the figures I’m looking at can be shared. So when I’m negotiating with my husband over what we can afford, we can show each other exactly what we are thinking.
They also offer a repayment calculator, so you can see what your repayments would look like on the mortgage you’re happy with, which is something worth checking out too. Thankfully, because of the increase in houses being sold, it means there are better mortgage deals out there. But, be sure to compare each lender and do your own calculations using the calculator above to ensure you’re happy with what you’re signing up for.
When Are You Ready?
For each person, it’ll be different. For me, I was ready when I had:
- A solid deposit
- Good credit rating (which you can check online for free)
- Happy with the prospective mortgage monthly payments
- Knew I could afford the houses I was looking at.
As soon as I ticked those things, I headed down to some banks. I spoke to a mortgage advisor who helped me with answering some questions. Then, when I was super happy, I went and got a mortgage-in-principal.
You need this to be able to view houses. Most estate agents won’t let you view without this, with some even asking for proof before they book you a time.
It is also worth looking at the UK’s Help To Buy Schemes. Some of these are amazing and can really aid you in having the best step in getting a home. My husband and I wouldn’t have been in the position to buy, if the government didn’t offer the 5% mortgage. We both had good jobs, both had a solid deposit, and somehow the stars didn’t align until we took that option. It is definitely worth looking at, and this site also aids you in finding a scheme that fits you.
I Own A Home, What Next?
There is a multitude of options available for those who have their foot on the ladder already. But I won’t pretend to know them all. I’m about to step into a new world by upgrading/buying a new home, so I won’t admit I know everything. But, what I have done is looked at the house prices in my area that have recently sold, to see what realistically my house could sell for. This is because of the equity in my house. I’ve had my home for a few years, we’ve overpaid at times too. So, we’d like to use that as a deposit for my next home.
I’ve looked at remortgaging, using the calculator with my bank as well as an external one, (such as Mortgage Calculator U.K.) just in case I was to go to another bank. I’ve looked at the house prices in my local area, and the area I desire, to see if I can afford them. I am planning on reaching out to a mortgage advisor, just so I know what I need to do before selling.
It will never feel like the perfect time to buy. It’s a huge purchase and the largest you’ll make. The worries when purchasing stay with you until you’re given the keys. However, even with house prices being at a high, there are also more homes becoming available. People want to downsize and up-size after the pandemic; they want a change. Even with the best will in the world, these things take time. In the meantime, keep an eye on the local house price. Take the time to build your credit rating and deposit so when you’re ready to launch, you’re on the right footing.
Have you bought a house recently, or are you looking at buying, is there anything making you nervous?