Buying a home whether it be your 1st home or a house move is the biggest financial commitment you will ever make, so it’s not a decision to be taken lightly.
As a mortgage firm, you think we would do everything in our power to encourage you to buy a home, but homeownership is not for everyone and well tell you why. If you fit into any of the below circumstances, then we do not feel buying a home is not right for you right now…
You are not financially stable
Applying for and paying for a mortgage require an income and a stable one too. Without a stable income a lender will not approve you for a mortgage and without a stable income would you want the stress of worrying about how you are going to pay it each month?
If you are currently out of work or have just started a new job with no guarantee it will be made permanent, we would advise against looking to buy a home until you have secured long term employment and are able to evidence this for a lender.
The same goes for those in jobs currently but are facing the risk of redundancy. The last thing you want to do is commit to a big financial commitment and just as you move in lose your job. If redundancies are on the horizon, or there are whispers in the corridors about
You have no emergency fund
When you own your own home, you are the one that is financially responsible for putting those things right. That could be a boiler breaking, a leak in the roof or even your car failing its MOT. You need to have some funds behind you to cover this cost when those unexpected bills appear. We advise that you have at least 3 months of running costs in the bank as an emergency fund, if you do not have this, we advise holding off buying a property until you have enough money in the bank to cover the deposit, legals, stamp duty AND the emergency fund. Otherwise, you can put yourself under a lot of financial strain without one when unexpected bills crop up.
You have little disposable income
Lenders must see that you have sufficient disposable income to be able to support a mortgage payment each month. If you have only a small amount of disposable income its unlikely a lender will approve you for a mortgage. Even if they did, you do not want to put yourself under pressure each month if again unexpected costs creep in and you do not have the funds to pay your bills that month.
You may be moving for work
Buying a home is a long-term commitment. Mainly because of the time it takes to complete a house purchase and the cost associated for buying too. Moving costs can be even more expensive, especially when you factor in the cost of a solicitor for selling AND buying, also the likelihood your stamp duty cost will increase as you will have used up your first time buyer allowance. You may also incur early repayment charges on your mortgage if you need to come out of it early due to the house move.
Buying a house isn’t a decision that should be taken lightly, you shouldn’t buy a house unless you see yourself living in it for at least a couple of years.
Your rent is cheaper than a mortgage payment
Homeownership is not for everybody, most European countries see more people choose to rent than buy as homeownership is not a priority for them. If you are not too bothered about owning a property and instead want to manage your monthly expenses, if the rent you are currently paying is cheaper than what the mortgage would be on your target purchase price then renting for the foreseeable as this will save you money.
Opportunities to invest elsewhere
If you are fortunate enough to have a decent sum of savings that you are thinking of investing, you need to calculate the rents on all types of investment that are available to you. Typically, a standard Buy to let property would yield a return of 7-10%, so you would need to compare that against the returns you could realistically achieve on your other investment opportunities. You can achieve a better yield/return on a stocks and shares investment or cryptocurrency you may prefer to invest in that rather than property to maximise your returns.
Why you shouldn’t buy a house with your partner
As we have discussed, buying a house is a long-term commitment and during a divorce usually the hardest and last part of the assets to be divided. We would advise against buying with a new partner if the relationship is new, you haven’t lived together before or have any doubts over your future together. We have seen it get very messy very quickly when couples want to split and need to sort the house and the mortgage. Just because you split up and don’t want to live together any more doesn’t mean the mortgage payments stop.
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