Buying your first house is a scary prospect. It’s the most amount of money you’ll ever spend on a purchase, so you’ve got to get it right. Many young people are struggling to get on the property ladder due to soaring house prices. Especially if you’re considering moving abroad. However, with some clever money management, there’s no reason you can’t take the first step. It’s all about building up a large pot of savings and making sensible decisions along the way. We’ll introduce you to the correct financial steps involved, and how to maximise your money. Done correctly, investing in real estate is one of the best things you can do with your cash.
#1 Build up a big deposit
Nowadays, getting on the housing ladder is all about building up a deposit. It’s time to focus on saving, and stashing that cash in your bank account. If you’re serious about buying a house, it’s worth collecting up to 10% of the total value. Ideally, you’ll want closer to 20%. We appreciate this is an enormous task, especially for first-time buyers. Of course, the amount you need will be lower if you’re looking at flats rather than detached houses. So be aware of what type of property you’re saving for. A large deposit will also lower your mortgage payments, and even secure you a lower interest rate. So, focus all your energy on building your deposit.
#2 Calculate how much you can borrow
With your deposit in hand, you can now begin to calculate how much you can borrow. This will give you the big figure of what you can afford to buy. To calculate your potential mortgage, lenders will first take into account the size of your deposit. They’ll also consider your monthly salary and the stability of your current employment. Your past credit score is also a big part of this decision. A lender will combine these elements together to determine how much money you can borrow. Of course, you can also get a rough estimate using a mortgage calculator online.
#3 Can you manage the monthly payments?
Once you have a quoted mortgage price, it’s time to figure out how to manage those monthly payments. Remember, any failure to pay the mortgage will result in severe consequences. It’s always good to leave yourself with some breathing room. Never over-extend yourself or buy more house than you need!
#4 Calculate the cost of living
Another crucial thing to consider is the cost-of-living. Sure, you can afford the monthly mortgage payments. But, if you’re moving to a new place, always factor in the cost of living. Wherever you are in the world, make sure you factor in the price of the city itself. What are the transport costs? What are the food prices? How much are the taxes?
Buying property is a huge step, but it’s one of the best ways to build wealth. Getting on the property ladder is a key part of your financial future. If possible, it’s best to do it sooner rather than later. The tips here will help you get there just a little faster.