Buying a home is a major commitment, and many households have to extend themselves to step on to the property ladder. Some households find themselves over-extending themselves, getting into debt, and this may be a problem.
The uncertainty surrounding the property market means no one knows for sure what is going to happen next. However, amidst the uncertainty, life goes on, but some people may be setting themselves up for problems because of the size of mortgage they are taking out.
Buyers are committing more of their income to mortgage payments leading to debt
The Moving Minds study has examined why people move home, and it is has looked into the reasons they decide to move. The survey also uncovered evidence which suggests 40% of property owners in the United Kingdom are committing more than one third of their salary on buying a home.
There is a school of thought that homeowners should bear the 28% rule in mind, with this figure being the maximum amount of their gross monthly income they should commit to rent or mortgage payments.
When arranging a mortgage, it is best to be honest and realistic. It is easy to see why so many people are keen to make sacrifices to obtain a mortgage. However, with so much uncertainty in the UK right now, overextending yourself may cause difficulties, placing your home at risk and you into debt.
There is a wide range of lenders to consider
If you are concerned about overextending yourself, you need to thoroughly review your options, and make sure you have spoken with a range of lenders. Not all lenders are the same, and some are more willing to offer flexibility and support than other lenders. Choosing one of these financial institutions may help a homeowner set themselves up for a more stable homelife.
The study also found many UK households are extending themselves when it comes to home improvements. There is a lot to be said for improving a home and spending in this manner can bring about a greater return in the long term. However, if you borrow money to pay for these renovations, you run the risk of causing financial problems.
Not every investment pays off. Any homeowner who is willing to invest in their property in the hope of it generating additional income in the long-run may be let down by various reasons. Therefore, you shouldn’t overextend yourself when it comes to the hope of enjoying profit in years to come.
Psychologist Professor Richard Crisp of Durham University, who contributed to the report, spoke about the financial commitments people make when buying a home. He said; “When it comes to our sense of identity, our homes are absolutely key. They satisfy deeply centred drives toward safety and security, they are culmination of life goals and aspirations, they are the stylistic expression of who we are, and they provide the psychological scaffolding that enables the relationship to grow. With such immense psychological value, people’s willingness to invest in them is quite understandable.”
Buying a home is an exciting time, but it is critical you take steps to find an affordable mortgage which allows you to feel confident about your monthly payments.