Can you afford a mortgage?
Friday September 26, 2008
Before wasting time trying to approach every mortgage company in the hopes that you will be approved by one of them, figure out whether you could afford one at all. While many mortgage tips talk about how you can afford a mortgage, one of the best tips is that it is important to recognise when you cannot yet afford a mortgage.
Do you earn enough money? Can you reasonably afford the most basic mortgage?
Sometimes it is as simple as whether or not you earn enough money to afford the most basic mortgage. You must take into account living expenses and assume that you will live reasonably. While living like a monk on a sustenance diet with no entertainment and minimal use of electricity may seem possible in the first week after you have signed off on an impossible mortgage, it will pale for the majority of people by the second week at least.
Do you have a reasonable investment in mind?
Many people will try to stretch their income to straining point in order to afford the most expensive house they could possibly repay. Buying the house of your dreams may not be out of your reach forever, but it could be right now. Use mortgage calculators to determine the difference in repayments you will need to make in case interest rates rise again. If you have not given yourself any room for interest or fee increases, then you are almost certainly trying to stretch your income too far.
Can you afford the insurance?
It is incredible the number of individuals who forget to factor in insurance when calculating what they can afford. Depending on the location of the home you wish to buy, its security features and the value of the building and your possessions, home and contents insurance could add a significant amount to the costs of your home.
Don't forget the rates
Rates are another expense that people who have previously been used to renting a property can forget about when budgeting for a home. You will also need to cover your water usage bill and possibly even other upkeep fees if you are living on an estate. These extra costs can add up and cripple your ability to pay off a mortgage if you have not already factored them in.
Please visit our comparison page if you would like to compare home loans and mortgages or to apply for a mortgage with a featured mortgage company.
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