Getting Mortgage Advice About What You Can Afford
The number one factor in good quality mortgage advice should always be affordability. Affordability is key when taking out a mortgage, as something very important is resting on it. Your home! Your home may be repossessed if you do not keep up repayments on your mortgage. It is as serious as that.
But, when we talk about an affordable mortgage, we first need to define what that is exactly. However, this can be hard to come by. The FSA has provided no single definition. In practice, this means that different mortgage lenders determine affordability according to their own standards. Ultimately, this standard reflects the agency's notions, not yours. Only you can truly know what your financial comfort zone is. This goes beyond income as well. Often, people with the same income have very different ideas about what they can afford to spend. So, to do this, individuals need to consider expendable income per month, discipline in financial matters and their expenditure profile.
Two people may earn the same amount, lets say 30,000 per year. But one person may save money at the end of each month and have a healthy pool of savings. The other person may rarely if ever have any money left at the end of the month. This type of person needs to make a careful assessment about what is affordable. It is easy to convince yourself that you "could"cut back. But to be prudent, you "should" cut back before you take out a new mortgage, for a period of at least 12 months and save some money. If you are unable to be disciplined and cut back, you should ask yourself whether you "really" can afford to take on such a serious financial commitment.
So how do you calculate affordability? You need to make an analysis of your income and expenditure over a period of time of at least 6 months. Make a list of your incomes and expenditure, and categorize the list. Some expenditures will be "necessary" such as food, clothing etc... Others will be existing credit commitments which must be met such as loans or credit cards. You may also have expenditures which are social, but not strictly "necessary". The difference between your income and your necessary expenditures is classed as your "disposable income". This is the money that you have each month that you can choose to spend - and which can be used to pay your new mortgage and household costs. You need to consider how much of this disposable income you could comfortably commit to a new mortgage.
Make sure you show everything to your mortgage advisor when you meet. If you hide things, these professionals will not be able to really give you the mortgage advice that you need. You might find yourself with more resources later on, but for the present, the advisor needs to know your true situation to help you succeed and build the future you want.
But, when we talk about an affordable mortgage, we first need to define what that is exactly. However, this can be hard to come by. The FSA has provided no single definition. In practice, this means that different mortgage lenders determine affordability according to their own standards. Ultimately, this standard reflects the agency's notions, not yours. Only you can truly know what your financial comfort zone is. This goes beyond income as well. Often, people with the same income have very different ideas about what they can afford to spend. So, to do this, individuals need to consider expendable income per month, discipline in financial matters and their expenditure profile.
Two people may earn the same amount, lets say 30,000 per year. But one person may save money at the end of each month and have a healthy pool of savings. The other person may rarely if ever have any money left at the end of the month. This type of person needs to make a careful assessment about what is affordable. It is easy to convince yourself that you "could"cut back. But to be prudent, you "should" cut back before you take out a new mortgage, for a period of at least 12 months and save some money. If you are unable to be disciplined and cut back, you should ask yourself whether you "really" can afford to take on such a serious financial commitment.
So how do you calculate affordability? You need to make an analysis of your income and expenditure over a period of time of at least 6 months. Make a list of your incomes and expenditure, and categorize the list. Some expenditures will be "necessary" such as food, clothing etc... Others will be existing credit commitments which must be met such as loans or credit cards. You may also have expenditures which are social, but not strictly "necessary". The difference between your income and your necessary expenditures is classed as your "disposable income". This is the money that you have each month that you can choose to spend - and which can be used to pay your new mortgage and household costs. You need to consider how much of this disposable income you could comfortably commit to a new mortgage.
Make sure you show everything to your mortgage advisor when you meet. If you hide things, these professionals will not be able to really give you the mortgage advice that you need. You might find yourself with more resources later on, but for the present, the advisor needs to know your true situation to help you succeed and build the future you want.
About the Author:
I you are looking for a qualified mortgage broker, then Economicfinancialsolutions.co.uk will help you in finding the best person to get the mortgage you desire.
posted by Vittoria @ July 10, 2011
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