How to increase your mortgage affordability

Improving your mortgage affordability potential and home buying power has never been more important. With the increase in the cost of living, fluctuating interest rates, and high inflation, you need to pay attention to the details that can counteract these current challenges. A new home could be more affordable than you realise.

With that in mind, here are a few things you can do that may put you in a much better position to buy the home you desire, and increase your mortgage affordability.

1. Minimise debts

If you can, reduce any debts, from credit cards to monthly insurance payments to car loans. Late payments can reduce your credit score, so ensure you don’t miss any payments. Reducing your everyday debts will mean you have more finance available, and a mortgage will become more affordable.

2. Build up a good credit score

It’s important to use your credit card or have some borrowing history because this shows your potential mortgage provider that you can pay back debts, and more importantly pay your bills on time and avoid any late payments. The more lenders are happy to lend to you, the more likely you will have more affordable mortgage options.

3. Access your credit report

Keep an eye on your report, checking details such as your address history, payment history, settled accounts, and whether you are on the electoral register. Any errors should be corrected immediately, as they could affect your ability to borrow, which in turn impacts mortgage affordability.

Experian is a reputable credit reporting company, find out how to check your credit score.

4. Reduce your debt-to-income ratio

Mortgage lenders closely examine your monthly outgoings in comparison to your earnings. So, if possible, pay off any existing debts and do not take out any more new loans. It’s equally important to be disciplined and monitor your spending.

5. Get a good mortgage advisor

Your chosen estate agent should be able to recommend and put you in touch with a good mortgage advisor. There are many options for mortgages today that help counteract the effects of high-interest rates and can make your monthly payments more affordable.

6. Porting your mortgage

This means if you are an existing homeowner, you could move home without needing a new mortgage. If you are currently paying a more favourable interest rate, you might be able to transfer it over to the new home, this could save you significantly in extra mortgage costs.

7. Longer mortgage terms

Mortgage lenders are now offering much longer-term mortgages, which means you will pay more interest overall, but this may help to reduce your monthly payments, making your mortgage more affordable.

8. Interest-only mortgages

Instead of paying a capital and interest mortgage, you could opt to buy the home you want with an interest-only mortgage, which costs far less per month. Then, if you decide to remortgage in a few years, you could change your mortgage product.

9. Increase the size of your deposit

It’s a bit cheeky, but there is always the bank of Mum and Dad to help increase the size of your deposit. This reduces the amount you need to borrow, but it’s also often one of the biggest hurdles to getting your first or even second home. Create a savings plan and stick to it. You can save money by being savvy with food shopping and socialising at home.

10. Earn more money

It may be worth considering taking on a second job or negotiating a pay raise. The more you earn, the better. It’s important to be realistic; don’t overdo it. Your earnings have to be sustainable, and your well-being comes first.

11. Be resilient and resourceful

Don’t give up. Keep searching for the home you want. There is plenty of room for negotiation right now. Sometimes you have to be patient. Your estate agent will have a deep understanding of your local property market and can put you in touch with a good mortgage advisor. Sometimes they will be aware of properties about to arrive on the market before they are advertised.

12. Talk to your estate agent

Your local estate agent will have a good understanding of the area you want to buy in. If you are flexible and open to DIY projects or older properties, this may open up other opportunities for you. Your estate agent can give you the right valuation for your home, and potentially make use of the good equity in your property.

Posted on: 30 October 2023