The Redmove guide to buying a home in York – Pt 1
This is the first part of the Redmove guide to buying a home in York and will detail how to calculate how much of a mortgage is affordable, what outgoings a mortgage lender will assess and what will happen should interest rates rise.
Buying a home is among life’s most exciting events – and one of the most expensive but with this Redmove guide to buying a home in York, we can show you what you should look for and how to prepare.
The first step in the process of buying a property is to decide how much you can actually afford since this is a long-term financial commitment.
For many people, particularly first-time buyers, it’s easy to get swept up into calculating how much of a mortgage you can repay but for many this also has a major effect on their inability to pay for the nicer things in life.
So even without a mortgage, potential homeowners need to carefully weigh up the pros and cons of taking on mortgage and bear in mind the additional costs.
Calculate your income for a mortgage
Firstly, you need to calculate what your take home pay is for buying a home in York, that’s after national insurance and tax has been deducted. You also need to deduct pension costs as well.
To this figure should be added any benefit payments receives as well as investment income or interest on savings.
That’s the easy bit done! Now to calculate your outgoings and it’s a bit more involved and includes working out what the council tax will be, gas and electricity bills as well as water payments.
Many people often forget to factor in things like telephone and Internet services as well as any satellite or cable TV subscriptions. Indeed, don’t forget every property in the UK needs a valid TV licence.
It’s also worth adding in other costs you incur a month, things like your mobile phone for instance.
Add up EVERYTHING you spend money on
Then when most people have worked everything out we also need to calculate, as part of your regular outgoings, the expected mortgage repayment, credit card and loan repayments, any pension contributions as well as life insurance and regular savings or investments you make.
On top of this, you should work out what the buildings and contents insurance bill will be as well as any charges to run your current bank account.
There are other things as well such as hire purchase agreements as well as travel and pet and also health insurance.
Most mortgage lenders will also ask to see a full breakdown of your outgoings this will include your travel to work costs, that will include car repayments and insurance, as well as MOT and road tax costs. Don’t forget also that you need to put fuel in the car and have it regularly serviced, all of which cost money.
If you don’t have a car, you will need to show how much a season ticket costs or what your bus travel costs are each month.
Other family costs for a mortgage for buying a home in York
If you have children, then a mortgage company will want to see any child maintenance costs, childcare fees, school fees and costs of school trips and meals. They may also ask for how much pocket money you give your children.
Finally, many people also forget about their everyday living expenses and these can add up to quite sum such as buying lunch every day, buying newspapers and magazines, going to the cinema and you’ll need to work out how much is spent each week grocery and clothes shop.
Remember the gym or a club or society, then these memberships need to be added into the mix as do the costs of eating out, family days out and going to the cinema.
That just about covers all of the costs that you will need to earn money for – the big question now is whether you can afford the mortgage repayments while maintaining a lifestyle that you are enjoying.
Your mortgage costs and why you should keep paying
Many people who buy a property will know that their mortgage is the biggest expense but it’s important never to lose sight of the fact that it is a loan secured against the property.
This means you cannot sell the property without paying off the mortgage first and this also means that if you fail to keep up repayments on a mortgage, the lender can repossess.
It’s more common now, especially since the credit crunch, that home buyers secure a mortgage before starting a search for their dream property which should put them in a strong position as a buyer.
There are lots of mortgage lenders who offer different terms and conditions with their mortgages. The best deals available are usually for those who provide a larger deposit which means that the mortgage lender is exposed to a smaller amount of the debt risk.
There are some good deals for homebuyers who contribute at least 15% of the property’s value which means a mortgage firm will loan the remaining 85%.
Be aware too that should you deposit less than 10%, then you may incur extra charges and fees that will be added to the cost of your mortgage such as a mortgage guarantee charge or a mortgage indemnity – some people also calling a higher lending fee.
How much will my mortgage cost?
It’s at this point we can calculate what a mortgage for buying a home in York may well cost with a simple calculation to give a fairly rough idea of what the interest rate is likely to be.
If we take the example from above of someone borrowing 85% of the property’s value, then they should take the Bank of England’s base rate and add to it 1.75%. That will be the annual interest rate, or something close to it.
Don’t forget too that interest rates are at an historic low and have been for longer than has been anticipated which means that the interest rates look likely to increase in the future. Remember this when working out how much you can afford to repay because a sharp hike in interest rates will mean that your mortgage repayment may become unaffordable.
To give you an idea of the likely increase in mortgage repayments, you should calculate that for every 1% increase in interest rates will lead to the mortgage repayment jumping by about £80 per month on a £100,000 mortgage. Obviously, if you have a £500,000 mortgage, then your repayments will jump by five times that amount.
The second part of the Redmove guide to buying a home in York and will detail how to find a mortgage, what a mortgage will cost and checking a credit history.
Contact Redmove, York’s leading award-winning estate agents and ask us more about how you can buy a property in York on 01904 488 444.
Redmove prides itself on being a professional and friendly award-winning York estate agent that is a member of the industry’s leading organisations. We conform to guidelines and codes of practice. Redmove are members of the Association of Residential Letting Agents (ARLA), the National Association of Estate Agents (NAEA) and The Property Ombudsman (TPO). The firm is also registered with the Trading Standards Institute (TSI). For the best levels of experience and expertise we can be contacted on 01904 488 444 or visit our website to find out more.