How to Work Out What Mortgage You Can Afford?

Most Australians dream to have their own home, but it isn’t easy. Monthly repayments can be hard, therefore, when you plan to buy a house, be sure to calculate the amount you can afford to repay on a regular basis. This is the best way to figure out how much you can loan.

After determining the amount that you can pay back on a monthly basis, this will make it easier to find a property that is within the affordable limit. It also allows you to organise your budget accordingly. As a general rule, you should not use more than 28 percent of your monthly income to make loan repayments. Although, it is a crucial investment, yet, it should not cross your spending limit. This can very risky, especially if interest rates increase.

Below we’ve listed details about how you can work out what mortgage you can afford.

Consult the Real Estate Agent

It may feel great to have your own place, but you must also know that meeting the day to day expenses is more important. If you set too tight of a budget, in the long term, you may find it hard to buy even the basic necessities. Consult a real estate agent to calculate the required budget or use an online calculator that gives an estimate of how much money you will need. The agent is well aware of the market rates. He can guide you in the right direction, keeping in mind your financial goals.

Carry Out Thorough Research

Research is very important when you purchase a home. Carry out detailed research to see the market prices and rates.

As a mortgage broker, we can help you with this. Comparing home loans will enable you to make the right decision and find out the maximum loan you should borrow that allows you to live comfortably.

For example, you wish to borrow a loan of $300,000 and have to make a monthly repayment of $2,000 based on the lender and cash rate. Before you sign up for it, you must ask the following questions:

  • Can you afford it?
  • Can you pay the monthly repayments?
  • Can you manage your other living expenses with these repayments?

If the answers to the above questions are yes, you should go for it. But if it is no, you should postpone the decision to buy a house until you are ready.

Find a Loan Package that Suits Your Financial Goals

There are a number of home loan packages in the market. The financial situation of every individual is different and one home loan may not be suitable for everyone. Therefore, it is very important to find a package that suits your financial goals.

The following are a few things you need to consider when finding a loan package:

  • What Interest Rate Should I Use? – When buying a house, borrowers have the option to choose a variable interest rate or fixed interest rate.
  • What Should be the Loan Terms? – Most home loans have a term period of 30 years or more. However, you can even choose a term of up to 40 years – the maximum term period offered in Australia. It is important to note that your repayments will be higher if the term period is short. However, if you pay off the loan faster, the overall cost will reduce as you will have to pay less interest.
  • Devise a Strategy – If you have devised an effective strategy, you will be able to repay your loan efficiently. Consult your broker in order to devise a good plan and come up with an effective strategy.

It will not be difficult to find out the amount of loan you can afford to repay if you carry out a thorough research, or consult Hunter Galloway, who can do it for you. Chat to our team today on 1300 088 065 or email Joshua Vecchio at [email protected]