How much house can we afford?
I’ve talked a lot over the last year or so about our plans to finally buy a house in 2021. We moved out of the house we own, rented it out and rented somewhere bigger. Over the last few years, we have been working hard to get ourselves into the position where we can finally buy our forever home.
We had planned to sell the house we own in 2020, but Covid hit and we decided to put our plans on hold. Now, we are planning to give our tenant notice in January and then get the house sold so that we can finally put our plans into motion.
I have been spending every spare moment trying to work out realistically what kind of house we are likely to be able to afford. I’ve looked into how much mortgage we are likely to be able to get as well as working out what the repayments would be. This is hopefully going to be our forever home so we want to push ourselves and buy something we really love, but at the same time we need to make sure the repayments will be affordable too. It would be awful to be living in the house of our dreams but not be able to afford to actually go out too.
Working out the finances
One of the biggest issues I think we might face is that I’m both employed and self-employed. That’s why I started looking into alternative ways of getting the finances we need to buy a house. From learning more about how to sell promissory note, which can be used to increase the amount of money available for borrowing, to looking into equity release schemes, I’ve tried to explore all options that might help us to get the house we’re dreaming of. I’ve always worried that my self-employment will cause us issues as some mortgage lenders are more reluctant to lend to self-employed people. However, having spoken to a few mortgage brokers, I have been reassured that there are plenty of lenders out there who will happily consider both our employed incomes as well as my self-employed income too. So, I’ve been trying to work out how much mortgage we are likely to be able to get using our total combined incomes.
The calculations are way above my ability, but Mortgage Calculators have made it really easy for me to work out how much mortgage we are likely to be able to get, and equally as important, how much the repayments are likely to be.
Note that these are not my figures, but are just to give an example of how much detail the calculators go into, so that you get a really accurate result.
As you can, the calculator lets you work out in detail how much you need to be earning in order to qualify for a certain level of mortgage borrowing. I think it’s great that it allows you to include and debt repayments you currently have. This isn’t always factored into these kinds of calculators, but it is definitely something that lenders will consider before making you a mortgage offer!
So, I managed to work out how much mortgage we are likely to be able to get based on our deposit, income and the fact that we don’t have any other debts. Next, I needed to take a look at what the repayments are likely to be. Whilst we do want to push our budget, we also don’t want to be in the position where we are struggling to meet the repayments each month. Again, I have used a calculator on the Mortgage Calculators website to work this out. This time, I used their Monthly Mortgage Payment Amount Calculator.
Once more, these aren’t my figures, but simply entered to show how the calculator works.
I think it’s great that you can see clearly how much your repayments are likely to be as it gives you a real sense of whether you will actually be able to afford it.
For us, buying our forever home is something that we have been working towards for a number of years now, and whilst we still have quite a lot to sort out before we can actually make that happen, I do feel it’s really important for us to be as financially prepared as possible. If you’re thinking of buying a house in the near future, then I really recommend using calculators such as these to work out what you are likely to be able to afford. This helps you to be realistic about the type of home you might be able to buy and also to work out whether the repayments would be suitable for your budget.
