Getting a foot on the property ladder is a dream of many people. When you feel inclined to settle in your life, the first thing that comes to mind is having a place that you call home. It is not surprising many people are under the impression that mortgages are more affordable than any lump sum small loans because the whole debt is paid down in instalments. Fixed interest-rate period deals do not last for more than two or three years.

After they come to an end, you are put on a standard variable interest-rate deal. It means your payments will become larger with a steep rise in the base rate. In the past, many people saw their dream of owning a home turn into a debt nightmare because payments steeply increased due to the boon market, and they ended up paying more than two-thirds of their take-home pay.

Consequently, they fell behind on payments, and they were dragged to court. It is quite easy to become trapped in a very expensive mortgage deal. Fortunately, you can preclude yourself from facing this nightmare.

• Make sure your financial condition will not be turned upside down

Mortgages come with longer repayment plans. Depending on the size of your mortgage, the repayment length could be up to 10, 20, or 25 years. People generally accentuate recent financial conditions at the time of buying a house. Do not forget that you are required to adhere to payments for a long period of time. Your current financial condition cannot guarantee that you will not struggle to keep up with payments. What if you lose your job, or what if your business becomes flat? Prudency is the passport to avoiding falling into mortgage debt.

• If you have lately started a business, you should not buy a house. Even though your business has gained momentum, you should check whether the pace of growth is sustained.
• If you are an employee and you have just switched your job, avoid buying a house. Spend some time in your new job and see if you manage to take it in your stride.
• If you have just started a business or got a job and you are still not certain what you want to do, you should avoid buying a home.

You might miss out on the best time to invest in the property, but you would also not be disposed to own a house when your financial condition is not strong. At the time of taking out a mortgage, you should have a pragmatic view of life. For instance, there is nothing wrong if you are renting an accommodation. After all, it brings flexibility. You can move out whenever you want. You really do not have to be worried about property taxes, appliance repair work, and the like. Buying a home is a major decision. You should wait until your career is stable.

• You must have an emergency corpus

You must have at least six months’ worth of living expenses in your emergency cushion, so you do not have to rush to take out instalment loans from direct lenders to meet unexpected expenses. Financial experts enjoin that borrowing more money along with a mortgage would make it challenging for you to keep up with debt payments. Remember that this emergency cushion should not include the deposit amount you will pay for your house.

An emergency cushion is needed to carry out repair work, such as if you have fallen sick and need some money for treatment. Medical insurance does not cover all expenses. Likewise, these savings could come in handy when your car needs a repair. The biggest advantage of having a safety net is that it prevents you from relying on money lenders in the UK for essential unexpected expenses.

• Ensure the total monthly payment does not exceed 25% of your after-tax pay

Normally, the pre-tax income is considered when deciding how much mortgage you can approve. There is a possibility of your mortgage payment being up to 35% of your pre-tax income. You do not have to adhere to this norm. Be practical while taking out a mortgage. If your monthly payment, say, is up to 30% of your pre-tax income, you will hardly be left with enough money to meet your essential regular expenses.

In addition to mortgage payments, you will have to pay income tax, property tax, etc. Some money would go towards your savings, and a portion of the money would go towards your discretionary expenses. The entire money would amount to 75% to 80%. Do you think you will be able to keep the roof above your head with such a whopping sum of money going out every month?

• Put down at least 20% upfront payment despite a good credit score

Your credit score should be stellar to avail yourself of lower interest rates. A few mortgage providers might approbate your application despite a terrible credit rating, but they will charge high interest rates. Bad credit mortgages require larger deposits, which could be between 20% and 40%, depending on how risky you are perceived.

Good credit mortgage buyers are not supposed to pay down more than 10% but try to make it to 20%. Arranging a larger deposit would help reduce the size of a mortgage. As a result, you will save a lot of money on monthly instalments. There is no need to rush. Start saving money as soon as you start earning money. Do not need to buy a house unless you have stashed away at least a 20% deposit.

• Do not increase the length of your mortgage

Be careful while choosing the repayment term of your mortgage. A longer repayment length means a high interest payment in total. This is because interest keeps accruing on the unpaid balance. The purpose of arranging a larger deposit is to reduce the size of a mortgage.

Of course, when the mortgage amount is small, the repayment length would be shorter. You should try to ensure that the maximum repayment term is not more than 15 years.

The bottom line

Before you decide to get your foot on the property ladder, you should always ensure that your career is stable. You should not be facing any financial problem that makes it hard to keep up with mortgage payments. Have an emergency cushion, so you do not have to borrow more money to meet emergency expenses.

In addition, arrange a larger deposit to whittle down the size of your mortgage. This would help you choose a shorter repayment period and save a lot of money. Buying a home requires deliberation. Apply for a mortgage when you are completely certain of your financial situation.