Should a mortgage be treated as a debt?

April 24, 2016 by Brendan

Advice & Tips

When people apply for a loan or a credit card, they often act with caution, making sure that they don’t take on too much debt.

However, buying a house, which is possibly the largest expense a person will ever take on, is usually viewed with far less caution. In fact, buyers are often encouraged to borrow as much as they can afford to buy the house of their dreams.

Although it is tempting to borrow as much money as you can to buy a larger or better home, it is advisable to take a step back and consider whether you really need a house as large, or whether you could buy a home in another cheaper area. If you were approved for a credit card and given a credit limit of £10,000, you wouldn’t think that you had to spend it all, and would probably not consider using all the available credit due to the expensive repayments and the high interest charges. A mortgage should be viewed in the same way, only borrowing what is necessary and factoring in potential interest rate increases and unforeseen expenses.

When you buy a property, the price of the house is just the start, as you have to pay household bills, insurance costs, any renovation or decoration costs and more each month. Although interest rates have been low since 2009, they could increase at any time, costing you much more each month. Before buying a house, spend some time talking to a CeMAP-trained mortgage adviser to find out whether the property really is affordable, or will become another debt.