Once you’ve been approved and know what you can borrow to buy a property, ask yourself…
Can I comfortably make repayments?
A simple formula to work out how much you can make in mortgage repayments would look something like this;
Monthly after tax income – Monthly expenses =
Approximate monthly repayments
If you’re purchasing with a partner, add theirs too.
Remember, a mortgage is going to be with you for a long time. Sometimes 30 years.
So, if necessary, putting a household budget in place may be a good idea.
Now, how much money you comfortably have left over after all of your expenses are covered should be a good indication for how much you can reasonably contribute to a mortgage and a ‘rainy day fund’.
Don’t forget that you still have to live your life and have some fun too, so be reasonably generous when working out your expenses.
What does that mean exactly?
Well, you still want to go on occasional holidays or treat yourself to some good food and some new clothes too right?
Also, consider the less than obvious future expenses like upgrading cars, renovation work and even the costs of having a family. How will that affect your future repayments?
This isn’t meant to be a dampener, but rather equipping you to be prepared to factor in things now to make life easier and less stressful for you in the future.
And remember, you’ll also need to allow for additional fees such as transfer duty (stamp duty), legal costs, moving costs and other fees dependant on your situation.
It’s also wise to allow some extra money for things that may just come up during and after the purchasing process.
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This information is of a general nature only and does not take into account your objectives, financial situation or needs. We are not financial, legal or tax advisers. You should seek appropriate professional advice specific to you before acting on this information.
