Taking the long-term view on your mortgage

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Taking out a mortgage is a big commitment, and often you will be paying back your mortgage over 25-30 years. This is a long-term arrangement, and possibly the first time you’ve ever had to think so far into the future.

There is a lot to arrange when taking out a mortgage. And to give yourself the best chance of being eligible, there is a lot to prepare.

It’s also worth doing some calculated guesswork, to make sure your mortgage roughly suits your lifestyle in years to come.

Here are some things to think about on the long road.

Car finance, personal loans and credit cards

If you are looking at getting finance on a car, or taking out a personal loan, you might want to think about how this will affect your chances of getting a mortgage in the future.

Large debts on cars and personal loans may work against you when a lender assesses your eligibility.

Likewise, lenders will take your credit card limit and shop cards into consideration when assessing your eligibility. If possible, reduce your credit card limits, and pay off your loans as quickly as possible to be in the best position to take out a mortgage on your house.

Serviceability

The lender will be looking at your income statements or tax returns, to ensure you are in a position to service your mortgage.

But things may change over the years. Will you still be in the same job in twenty years’ time? Or do you have other aspirations? How are these aspirations likely to affect your ability to service your mortgage?

If you are close to retirement, it might not be the best time to take out a large mortgage. Look at reducing your costs, rather than increasing them.

If you have plans to quit your job, and travel the world, you also need to think about how you will service your loan. What are your options?

Make sure you consider as many variables as possible, such as losing work due to an injury, or paying for kids’ education. Will this all fit into the big picture?

Is this your forever home?

You’ve probably chosen your home to suit your current lifestyle and proximity to work or schools. But how long will these commitments last?

As your kids grow up, go to university or start their own lives, consider your prospects. Will you need to downsize? Will you have enough equity in your home to secure an investment property for income, or to house your kids while they study?

We can’t ever know the future, and try as we might, we can’t control all the variables. But we can do our best to be in a position where we are eligible for a loan, and to be able to service that loan over the next 25-30 years.

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