The first step in buying your new house is determining how much you can borrow. This will depend entirely on your budget. That is, how much you can afford to pay for your deposit and for your repayments. This step should be taken before finding a lender or even looking for the home of your dreams. Be prepared to take a close look at your finances and to make plans for the future.
Home loans can be backbreaking if you do not know what you are doing. However, the dream of owning your own home is perfectly attainable if you have someone to guide you. Do contact us for your consulting or assessment needs when it comes to personal or home loans as well as other financial issues.
The reason why it is important to take this step first is because owning a home may not be the right step for every household. If you cannot afford a mortgage, forcing your finances into a precarious place will do nothing to help you. There are some issues to consider when you are trying to determine how much you can afford to borrow for your home loan (if anything at all.)
If you have an idea of the kind of property you want, ask yourself would you be able to afford the kind of repayments that home would require? Would you still be able to afford paying for your home in case of unforeseen circumstances? What would happen if you were to lose your job or if there was a sudden rise in interest rates? What about an unexpected pregnancy, illness, or accidental injury? Consider possible scenarios to make sure that you would be able to make all of your payments comfortably.
Remember, owning a home implies much more than just paying for the property. Also take into account whether you would be able to maintain the property, paying all the utilities, taxes, and upkeep. Perhaps there are options that make more sense for example, using your cash for other assets other than property.
If you decide that you actually do want to own your property, then you will need to use your head to determine exactly what you can pay. We cannot stress this enough do this before you look for a house. This is a decision that has to be made with your head and falling in love with a particular house can lessen your chances of making the right decisions.
In general, you will want to consider both the deposit, which is no less than five percent, and the repayment amount. Repayments should not take more than a third of what you earn each month. You should also take into account other possible expenses, such as mortgage protection insurance (particularly in expensive areas such as Sydney.) Also take into account all the solicitors and real estate agents’ fees as well as possible taxes and the cost of having your new home inspected.
Written by eChoice