When applying for a mortgage, it’s tempting to focus on getting your application approved and worry about how you’ll manage the monthly payments later. Yet it’s essential to run the numbers first to avoid stress further down the line.
It’s everyone’s worst nightmare. You find your dream house. It’s a bit more than you’d planned to spend but you love the property, and it ticks every box. You’ve fallen in love with the idea of making it your next home and you’ll do whatever it takes to make it happen.
But can you really afford it without putting yourself at serious risk of financial hardship? If you can’t keep up the monthly payments, you could lose your new home. Comedian Mel Giedroyc spoke candidly in a recent interview with The Telegraph about how she lost her home after taking on a big mortgage. Mel had sleepless nights after taking on a ‘stupid amount of money’ to buy a big house, then losing it when work dried up. The comedian and her husband Ben had to sell up quickly and move into a rented flat.
Talking to a reputable mortgage broker who will be open with you is a sensible step. A broker, along with a prospective lender, will look at what your income and outgoings are – not just what you could borrow. If they have concerns about your ability to afford your monthly payments, they should tell you.
At MB Associates, we will offer you clear-cut, unbiased advice, even if it’s not always what you want to hear. When you talk to us about how much you’d like to borrow, we’ll tell you in no uncertain terms if it’s too much of a stretch. ‘I take giving advice very seriously because I am a homeowner myself,’ says MB Associates’ Sales Manager Phil Leivesley. ‘It’s about really understanding the client’s situation. I will sometimes say: “I think this is going to be the best solution for you” and sometimes that involves some hard talk as well. Sometimes I have to say: “You can’t afford this property – maybe you need to reassess your affordability”. It’s incumbent on us as advisers to give the best advice in all situations.’
It’s important for you to take your outgoings into consideration. Don’t just look at the amount of the monthly mortgage payments and think it sounds like a reasonable figure. Check it’s affordable when you factor in all your monthly outgoings. If not, see where you might be able to cut back. And if you can’t do that, then review your borrowing expectations.
Be absolutely clear on what you’re currently spending. Most of us know what we spend on rent and bills but are less clear on monthly spend on other items, such as food, going out and daily costs like travel. Make sure you know exactly how much you are spending each month overall, not just what your bills are.
Remember there are other costs associated with buying a property. These include solicitors’ fees, a survey, the lender’s valuation, moving costs and a broker’s fee (they should be up front about their costs). Your lender may also charge an admin fee although they may add it onto your mortgage. And you’ll also need to arrange buildings and contents insurance before you move into your new home.
Incidentally, if you are about to purchase a property, it’s well worth looking into financial protection so that you are covered in the event of illness or injury and can’t work. Income protection pays out a monthly lump sum covering up to 65 per cent of your salary in the event of illness or injury. Critical illness pays out a one-off tax-free lump sum if you are diagnosed with a serious illness. We can advise you on both.
We’re here to help if you would like advice on what you can afford to borrow. Feel free to contact us
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