How to Decide Whether a Mortgage is Right for You

Taking out a mortgage can be a really big decision and it can be easy to go into it a bit too lightly without serious thought. Those people who cannot manage to save up for a deposit or get a loan due to their work circumstances may wish they had one, so that they could own a home, but there are some people that choose not to have one, even if they can get one.

Getting a mortgage is not just about taking on a huge 25 year loan and borrowing the highest amount of money that you ever will in your life. That may be scary enough for some, but there is still the responsibility and potential problems that come with home ownership as well. There will be additional expenses compared with renting such as insurance, both buildings for the home as well as life insurance for the term of the mortgage. You will have to pay for any repairs that need doing due to wear and tear as insurance will not pay out for that as well as boiler services and any updates you want done to the property. There can be a lot of extra expenses, perhaps more than you might even expect.

The lender will only give you a mortgage if they feel that you can cope with the cost of the repayments. Although this is quite a thorough check based on your current income and expenses, it does not mean that things will stay the same in the future. It is worth thinking hard about how you might cope in the future if things change.
It may be possible that you have a job which is likely to get insecure in the future. It could be that there will be less demand for the work that you do or that your specific employer decides that they will not be able to have so many employees in the future. Depending on the field of work you are in and how far you are prepared to commute, you may be able to get something new quite quickly and redundancy not be a problem, but it is worth considering.

You may think that you can get insurance which will protect you against this. However, although there are income protection insurances it can be difficult to get them to pay out. They will only pay out in certain, specific circumstances and so you will need to carefully check and make sure that they will cover you for being out of work, unwell, unable to cover the costs or whatever the reason might be that you cannot afford a monthly repayment.

Another thing that may happen in the future is a change in family circumstances. It may be that you have children and this changes the earning potential in the household as well as the costs. Two incomes may suddenly become one and this can be a big change. Even if work time is only missed for a small amount of time, there will be the extra costs of children as well as paying someone to care for them when parents are at work. It may be that someone in the household has to give up work to be a carer and this could mean a big change to the potential income. Obviously it is hard to predict the future but it is worth considering whether there is a chance that this may happen and whether it could make a difference to how well you could manage the mortgage payments.

Of course, a mortgage repayment, including the associated insurances is often cheaper than rental and so it could feel like it is a simple decision to switch from being a renter to an owner. However, there are more responsibilities and other costs associated with owning a property compared to renting. If you want to move it can be more difficult as you cannot just hand in your notice and be out in a few months, you have to wait for the house to sell. This means that if you change jobs and move to a different part of the country it could complicate matters, as well as if you need a bigger or smaller property in a hurry. You also run the risk of the property value dropping and if you do want to sell and move you may not be able to get back what you paid for it. This is more likely to happen in the short term, but some situations could lead to it being a long term problem.

So there are many things to think about. The cost and the chances of you making repayments are just a few of them and possibly most important but it is worth thinking about the convenience of being able to move easily and the effect of any changes to your family in the future.

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