Too many people feel they have become ‘priced-out’ of living the lifestyle they desire. It’s easy to feel defeated when you look at how much it can cost just to buy yourself a modest home. You don’t have to be in the highest earnings bracket to achieve the dream, though. It might take a few sacrifices and a bit of time, but it is possible to put enough away to buy yourself a home. Here’s how to get started, and how to make it on the property ladder:
Pay It All Off
There are plenty of reasons why you should focus on paying off all that credit before you start shopping for a home. The main reason is affordability. A mortgage lender can see what you owe and your payment history when you make your application to buy a property. There is no hiding it, and no running away from it.
Clearing everything you have on credit might take some time. Simply add up all of your monthly repayments. That’s probably quite a sizeable sum and a substantial part of your salary. Now imagine if that was cash in your hand to spend on nice furniture, landscaping your own garden, or building the extension for your games room.
To make sure you can afford to pay off credit cards, loans, and store cards quickly, you’ll need to fine tune your monthly budget. Consider moving to a less expensive apartment, or subletting to reduce your rental costs. Cut back on eating out, take-out, and bar hops. Stick to a ‘going-out’ budget that gives you a good evening each week without breaking the bank. Audit your closet and only buy when you need to replace something.
This little exercise can dramatically reduce your spend each month. This means there is more of your salary left over to speed up repayments of your credit agreements. Start with the most expensive one – this is usually the credit card. Figure out how long it will take to clear everything. This is your goal (but do give yourself a couple of breaks.)
A strict budget will help you a lot here, but it certainly sucks all the fun out of life. Instead, make sure your budget allows for a vacation fund and a pot so you can buy loved ones gifts. You might need an emergency fund to cover any big bills like the car breaking down, or an appliance falling apart. This budget could help your mortgage lender see just how frugal and sensible you are with money. It could open up better mortgage products to you.
Once all that credit is paid off, live within this budget for three months. This will show up on your bank statements that any mortgage lender will have access to. Looks good, yeah? They will think so. Remember, a joint mortgage application is more likely to be accepted. Do you have someone special to share this responsibility with? Why not try to save together?
Save money by shopping with coupons. You can use voucher websites like DontPayFull.com and wait for discount prices to be available for those big buys. Reduce your energy bills by batch cooking and turning the thermostat down a degree in winter. Choose a smaller TV and internet package, and avoid upgrading things like your mobile phone this year. Once you’ve got your mortgage, you might find that it is cheaper than renting and you’ll be able to enjoy your disposable income again!
For now, you’re working hard to build up a strong savings pot. Don’t be fooled into thinking you only need ten percent of the purchase price of a property. There are many fees, taxes and other expenses you’ll need to pay up front. You’ll probably want to do some renovating and decorating when you move in too. This might add months or even years to your wait to save enough. Don’t be disheartened and don’t be tempted to spend those savings on anything else.
It’s important you make your money work hard for you. If you’ve already calculated how long it is going to take to save up enough, then you can plan how long you need to put that money away for. The highest interest accounts demand that your cash is put away for up to five years. That’s fine for you because you know you might be that far away from completing your goal. Let that cash start earning money for you!
You can find quick online estimates to determine how much a lender might offer you for a mortgage. It is usually based on your joint income plus the total amount you’re willing to put into the purchase price up front (deposit.) You can try a few of these to get a good idea about the value of a property you might be able to afford. Some of these comparison sites will even give you an estimate of your monthly repayment amount. Double check this is genuinely affordable.
Now you know how much you can borrow, you can start to search for a property that fits the bill. It might need to be more modest than you were hoping. Everyone needs to start somewhere on the property ladder! Of course, there are several ways you can get a lot more for your money. It depends on what you want.