Is this the right time to buy?
We’re first-time buyers and with lots in the media about house prices falling, or at least not rising at such a fast rate, is this a good time to take out a mortgage? We’re worried about negative equity.
First and foremost your home is exactly that – somewhere to live. If prices go up, that’s a bonus, but it shouldn’t be your priority. Whether you buy now or not depends on your circumstances. The main issue is whether you can afford it. Lenders look closely at affordability when deciding how much to lend, taking into account outgoings as well as income. They want evidence that you can afford your mortgage now and in the future, when interest rates rise. The issue for many first-timers is that they don’t have much of a deposit and if property prices fall, they may end up with a home worth less than their mortgage, meaning they’re trapped and unable to sell. But that’s only a problem if you’re selling – over time, property prices recover so you will find your equity position improves and you’re no longer in negative equity. It’s another reason why you should buy property for the long term, not in the hope of making a quick profit as that’s unlikely to happen.