At a certain point in your life, you need to think about how you’re going to stop renting and start buying. Renting, as you may have heard, is dead money. What this means is that you’re paying for something and in the long term, you’re not getting any benefit from it. You might also be spending extra money on the property that is ultimately going to benefit someone else.
For instance, you may have been renting a property for a few years. At a certain point, you might start to think about making improvements and completing renovations. This could ultimately end up costing you thousands and eventually you’ll move on. But, when you do, you won’t see the benefits of the money you put into the property. It’s the landlord who will benefit from your hard work and cash.
So, what’s the other option? Well, you might want to think about getting on the property ladder. It can be difficult to purchase your first home, and there’s a lot of financial issues you need to consider.
Can You Afford The Initial Cost?
The initial cost of buying a property is going to be the deposit. This can be anything from five percent to twenty-five percent of the asking price. The higher the deposit, the better the mortgage deal you get will be.
So, you need to work to save as much money up as possible before you buy. Thankfully, there are ways to make this easier such as home savers accounts.
When you put money in a saving account like this, the government will add as much as twenty-five percent onto however much you earn each year. You can also think about investing any cash that you earn in more than just savings accounts. For instance, by buying shares, you can increase your capital to a point where you’ll be able to afford your first home.
Getting The Mortgage
To make sure you get a great mortgage on your first property, you need to sort out your credit score. A credit score is determined by how well you have paid off debts in the past.
For instance, if you have always paid bills on time, your credit score should be healthy. On the other hand, if you have been late with rent on a few occasions your score could be low. To improve it, pay off all your debts. Then take a loan out you know you can pay back. Keep doing this until you’re back in the green.
After this, you’ll need to think about how much you can afford to pay and the type of mortgage you want. You can use a mortgage calculator with escrow to find out how much you’d need to pay based on a certain deal offered. It’s crucial you do this because otherwise, you can end up on a contract you can’t afford.
Dealing With Payments
Finally, once you’ve bought the property, you’ll have to handle payments. If at any point they reach a level where you can’t afford them, you might need to remortgage. This can give you some relief and ensure you don’t end up accumulating a debt.
After a few years paying the mortgage, you’ll find the benefits of owning far outweigh the deadweight of renting your home. You also have an investment that you can use to stabilize your finances.