Can You Handle a Home Loan?
Taking on a home loan can give you access to the property ladder, and set you on the way to future comfort and success. A home loan can also, however, put you under significant financial strain if you are not ready for this very important commitment. A loan is a huge responsibility, and one that will require some serious contemplation. Herein, we consider what situation you need to be in to be able to handle a home loan.
Are You Financially Stable?
Being financially stable really means that your outgoings are less than your income on a weekly, monthly, and yearly basis. No matter what you earn, as long as you are living below your means, and are able to save significantly from each paycheque, then you are generally considered to be financially stable. Financial stability with the increased cost of loan repayments is an essential prerequisite for such investment.
Do You Have Savings?
To take out a home loan, you will need to have savings to use as a deposit. No loan will provide you with 100% equity, so you need to be able to provide some savings to use as a deposit for the home. In addition to this, however, you will also need savings that are capable of covering mortgage repayments and living expenses for at least three months, if, for any reason, you are unable to earn. Having a cushion of savings can keep you from falling behind on payments.
Do You Have Job Security?
Job security is very difficult to determine, but there is a definite difference between a full-time teacher and a self-employed tradesman who moves between jobs and worksites. If you do not have job security, then taking out a loan can put you in a difficult situation, because it will mean that you simply have to earn each month and week. Working in a job with a long-term contract, however, will provide you with greater security and comfort.
Do You Have a Good Credit Rating?
Getting a good credit rating will take a great deal of time and effort. Those people that simply do not want to have a credit card may be financially shrewd by living off the money that they have, but it also means that they will have no credit rating. Proving that you can pay back money that you borrowed on a credit card, or car loan, will greatly improve your chances of getting a home loan, with a good rate. Overspending and falling behind on credit card repayments, however, will leave you in significant financial trouble.
Can You Find a Good Loan?
Depending on your age, your means, and your credit rating, getting a loan with a good rate of borrowing can be difficult. Some loans will have a very high rate of interest and this can severely limit your ability to repay it, and to make savings for future investments too. Buying into an expensive loan is not worthwhile, but finding cheap home loans and shopping around for the best deal can offer you considerable savings. Finding a good loan will certainly affect whether you can afford the costs or not.
A home loan represents a significant investment and commitment, which is foolish to jump into without careful planning. Financial security, savings, and the right loan offer, are very important elements to arrange before taking out a loan. You will also need to ensure that the property you are buying is in good condition and represents a good investment in itself.