Financing a house purchase
Published Thu, Dec 12, 2013 Updated Tue, Feb 16, 2021
Buying a home is the biggest purchase most people ever make and although it is not as easy these days to find finance for the purpose as it was before the recent recession hit, it is still possible to get an affordable home loan. There are several important things to bear in mind, many of them based around where you see yourself being both geographically and in your job and family attainments in several years time.
Moving on up
If you are at the beginning of a career structure and don’t have a family as of yet, buying something small to get on the ladder might be a good plan, but if you think you would find it hard to make payments, you would be better off staying with parents or other family members or sharing in a flat or house, saving meanwhile for a significant deposit. This way, you could take out a smaller home loan when you find the right place; most lenders look very favourably on a borrower with a larger deposit because it shows a degree of commitment and financial responsibility which bodes well for the future. Waiting until you are settled can also work out cheaper, because you won’t have fees to find every time you move.
If you have reached a stable time in your life, you may be looking to buy. If you haven’t had a chance to amass a large deposit, you might consider buying through a Housing Association, whereby you co-own the property with them. Your monthly outgoings are made up partly of rent and partly of mortgage repayments, so might not be much less than a simple repayment mortgage, but there are usually benefits such as sharing responsibility for things like repairs. There are often government initiatives available to first time buyers, usually buying new build properties, but you need to keep an eye on what is available, as they are sometimes in short supply. Once you are on the property ladder, you are in a position to move up when you can, although of course there is the problem of selling when you need to move. If you can’t sell, you could consider becoming a landlord, but this needs special financing.
Buy to let
If you want to become a landlord as an investment opportunity, there are special mortgages available. Don’t be tempted to simply rent out your main home without telling the lender – this could put you in default of conditions and can be very serious. Most lenders don’t mind a short term rental, when you need to move for work, for example, but it is vital they are kept in the loop. Other special circumstances such as arranging a loan in principle if you are planning to buy at auction also have specialist lenders to help you; most estate agents can put you in touch with the right people. There is always a loan out there for every property and with patience it can be found. However you will often manage to buy a house quick if you get in touch with the right people.