Working out the loan amount is an important first step towards home ownership, so it’s imperative to work out how little or how much you can comfortably afford to borrow.
While it’s important to seek the advice of lenders when you are working out the amount you wish to borrow, where money is involved, there is only one person who knows what’s best for you – you!
The loan amount you borrow will dictate your regular mortgage repayments so it’s important you don’t borrow more than you can afford to pay off regularly.
To work out what repayments are affordable for you, begin by assessing your income and expenses.
Once you have a handle on this, you should take into account any changes that might affect your income stream in the future, including expanding your family, weddings, change in employment, holidays and interest rates rises.
Another significant factor to consider is the type of lifestyle you want to live while paying off your home loan. Meeting loan repayments will impact your lifestyle significantly so it’s important to be prepared for that and to keep your loan amount to a minimum if you want to keep some of your guilty pleasures – such as nights out and weekends away.
As a general rule, your total mortgage repayments should be no more than 30 percent of your total gross income. It’s also wise to leave a buffer of at least two percent to protect yourself in case interest rates increase.
To view your next home loan steps, click through from the list below;
Home Loans Guide – Step 2 of 7 – Purpose
Home Loans Guide – Step 3 of 7 – Type
Home Loans Guide – Step 4 of 7 – Deposit
Home Loans Guide – Step 5 of 7 – Features
Home Loans Guide – Step 6 of 7 – Application
Home Loans Guide – Step 7 of 7 – Fees & Charges