When’s the best time to get a mortgage?

The best time to apply for and take out a mortgage depends a lot on you and your personal circumstances and there is no easy formula that will help you to figure out the answer. Here are some pointers though;

Why do you want a mortgage?

If your main reason for wanting to buy a house is that you dislike wasting money on rent and you want the financial investment then the best to get a mortgage is as soon as you are in a position to do so and as soon as it makes financial sense for you.

But if you want a house of your own for different reasons – perhaps simply because you want to own your own place and have somewhere that is yours – then the financial factors don’t really matter so much. Certainly you shouldn’t ever risk getting a mortgage if you can’t afford it, but if owning your own house is going to give you a big lifestyle benefit then you should weigh that up along with any financial considerations and just go for it if you can.

What about the financial factors?

A lot of people assume that renting is a waste of money and that owning a house isn’t, because when you rent you are throwing away your money each month and when you own you are paying off a mortgage each month.

The truth though is that in those first few years about 90% of the money you pay is interest and only a small amount actually goes towards paying off your equity. To be financially beneficial the interest part of your mortgage payment needs to be lower than your rent payments would be.

House value and other costs

When you think about it there is no clear, black and white answer. In the long run house values will probably rise, so a house is also an investment which it is hard to put a value on, but right now house prices are not all that stable, so it is hard to justify relying on capital gains.

Ultimately you should only get a mortgage when you are sure that the benefits (both financial and otherwise) outweigh the costs and the risks.

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