The first question to ask yourself when considering purchasing property is how much can you afford.
This is no easy question within itself, and relies on several key factors:
- Determining your serviceability
- How much deposit do you have
- Real estate market and economic outlook
- Financial and lifestyle considerations
Understanding your serviceability is not easy as each lender has their own way of calculating this. Knowing how much you can afford to pay on a home loan is often a different figure to what the lenders think.
How much can you afford to pay back each month? How much do lenders think you can pay back each month? Different questions with different answers
Interest rates have been relatively stable of late, but this can always change and needs to be considered.
Property loans are a long-term commitment, and you could be paying them off for 30 years. Make sure you feel like you have a stable job and that you think your expenses won’t dramatically change in the foreseeable future.
How much deposit do you have? Are you receiving a gift, government grants or have you saved the deposit or using a family guarantee?
The general rule is to have 20% of the purchase price of the property. It is possible to still secure a home loan without this much however you will attract Lenders Mortgage Insurance unless you have a family guarantee. Chat with a broker to see how the figures can change depending on how much deposit you have access to.
You will need to look at the real estate market in the area that you want to buy. Can you afford to buy in the area where you want to live? Are you better off renting and buying an investment property in your sought-after area? Maybe you could engage a Buyer’s Agent to help you if you are having difficulty or don’t have the time. Enquire with WhiteStar Buyers Agent to know more about our buyers agent service.
Think about your current financial situation and what may change. Are you starting a family? Have ageing parents? Starting your own business soon? These are all large expenses that will impact your cash flow.
Lifestyle choices also need to be considered. Perhaps you would rather travel than buy property. Or lead a more expensive social lifestyle that takes up most of your income.
At the end of the day, it’s up to you what you do with your money. However, if examine all the factors above and talk to a qualified mortgage broker, you can hopefully make the right choice for you.