Most Australian’s dream of buying their own home but it can be confronting when you sit down and work out what you can actually afford. Suddenly your dream of owning a three bedroom home with a large garden and entertaining space has become a small two bedroom unit. You’re financial situation will ultimately define what you can afford to buy so calculating your home loan repayments is a great place to start.
What are loan repayments?
Loan repayments are the payments you make to your lender to pay back the amount borrowed for a home loan. The loan repayments are calculated by the lender and include interest and any additional fees. Depending on if you choose a fixed or variable rate, will determine if your loan repayments will vary throughout the term. Usually repayments are paid frequently throughout the duration of the agreed term either fortnightly or monthly. When you make a loan repayment to the lender, the amount is debited from your outstanding balance until you pay back the total amount.
How can calculating my repayments determine the amount I should borrow?
Working out what you can afford to borrow is easier if you can break it down into loan repayments. The higher the cost of the home, the more you will need to borrow and the higher the repayments will be. Work out an amount you can easily commit to paying off your loan each week, or month, and use this repayment figure to determine the amount you can comfortably borrow.
Have you got a figure in mind that you would like to borrow but are not sure you can afford the repayments? Use the RateCity home loan repayment calculator to help you do the maths and land your dream home.