FAQ
FAQ
Frequently Asked Questions
Am I Ready to Be a Homeowner?
Taking the leap from renting to owning is an important milestone in many people’s lives. Not only does it signify that your financial affairs are in order, but it also means you’re finally ready to settle down (at least, for the time being!). Of course, while owning a home comes with a myriad of benefits, there are still several drawbacks to consider, including the fact that homeowners are now strapped with one very big financial responsibility. Despite these financial obligations, though, many homebuyers will tell you that there’s nothing quite like owning your own home.
Is Renting or Buying Better?
Buying
1. You’re investing in your future
If you own your home and have a repayment mortgage, rather than interest only mortgage, you are investing in your future and creating a valuable asset. Your monthly repayments aren’t going to a landlord and creating ‘dead money’ for you. However whilst the value of your property may go up as well as down, at the end of the term of the mortgage you will own the property outright.
2. Freedom
If you own your home you can do what you like to it (within the planning regulations). You can make it a home for your family or simply move in and carry on. You’ll also be in direct control of any problems with the property and won’t have to deal with agents or Landlords.
3. Discipline and experience
The house buying process can be a daunting one, but when you have done it once, the process is very similar for future purchases. If you’re a first time buyer, owning your first home [h1] can be a great way to kick-start financial planning for your future and help you to create a household budget to manage the costs of running a home.
4. Community
An often overlooked advantage of buying your property is that you’re also becoming part of an existing community that makes up the local school, church or shops and create lifelong friends and support.
Renting
1. Flexibility
Renting allows you to choose pretty much where you like to live. In most cases you can break a rental contract after 6 months, allowing you to move to a new location or try a new location perhaps as a test before you decide to commit and buy in the area.
2. Free from financial responsibility
As a renter you are not going to fall foul of any housing market related conditions. You will of course have to pay rent but you’re not tied into monthly repayments on a bigger loan and therefore cannot fall into negative equity.
3. No maintenance costs
As a tenant it is the responsibility of your landlord to maintain the property, pay for decoration and its upkeep.
What Is Pre-approval?
A mortgage pre-approval isn’t a promise that you’ll get a loan for the home you want to buy. A mortgage pre-approval only means a loan officer has looked at your finances—your income, debt, assets, and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.
Am I Ready to Rent?
Although you may feel ready to get out on your own, or get back out on your own, make sure your finances are in order before you take the leap. Take a look at some rental listings in the areas in which you are interested in living and get an idea of how much you’ll have to pay to live there.
How much rent can you afford? Guidelines suggest that you shouldn’t pay more than 25% to 30% of your gross salary for rent. In other words, if you make £30,000 per year, you should look for apartments that cost about £750. If this isn’t realistic in your area, you may have to get a roommate to share the cost.
Next, you’ll have to consider your other monthly expenses and whether you’ll be able to pay those bills as well. Do some accounting to determine how your finances will balance out with the added expense of living in your own place. Start with your monthly take-home pay, add any other income you might receive and subtract your other expenses from this number.
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