Things to consider before taking out a mortgage

Buying a house and taking out a mortgage are two of the most important financial decisions you’ll probably ever make. Taking out a mortgage is a big responsibility and financial commitment. Here are a few questions you should ask yourself before applying for a deal with a lender.

How much can I realistically afford?

You’ll need to assess how much you can realistically put down as a deposit, and how much you can afford to pay back each month. Your mortgage term could last a total of 25 years or more, so it’s important that you carefully consider what you can borrow, even if your circumstances change. You should consider whether you’d still be able to afford your mortgage should you change jobs, lose your job unexpectedly, or get into debt, and whether you’d also have enough cash available for life’s general ups and downs. Always remember that your mortgage is secured against your home. If you fail to make your regular monthly repayments, your lender could repossess your property.

How much can I put down as a deposit?

The more cash you can put down as a deposit on your home, the better. When calculating how much deposit you’ll be able to put down, you should consider whether you’ll have enough to live on and make your regular mortgage payments based on your current income. If you’re currently saving for a deposit, consider how long you need to save for – is it better to hold off and save more money for a longer period of time so that you can get a better mortgage deal?

Do I need a guarantor for my mortgage?

A guarantor such as a parent could help you take out a 95% or 100% mortgage if you are finding it especially difficult to save a deposit. You would be responsible for your monthly repayments to a lender, but your guarantor would need to make them in the instance that you couldn’t. Anyone can be your guarantor, but they must understand the legal and financial implications of doing so.

Can I get financial help through a government scheme?

You could be eligible for the Help to Buy government scheme if you are a first-time buyer and are struggling to buy a mortgage. Help to Buy is for people who typically struggle to get a 5% deposit on a home. For more information, you can read our comprehensive iam mortgages guide on Help to Buy to see if you are eligible.

What type of mortgage deal should I get?

There are many different types of mortgage out there, and the right one for you will depend on your financial situation. If you decide on a fixed rate, you’ll pay the same amount in repayments each month for a fixed amount of time, while a variable rate will give you more flexibility and the option to make under or overpayments, with a potential lower rate of interest if interest rates fall. For more advice on the right type of mortgage for you, read our guide to the various types of mortgages available, or get in touch with our mortgage experts at iam mortgages. Simply fill in an enquiry form or give us a call and we will be happy to answer your questions with our free, impartial advice.