It is easy to look at your maximum borrowing capacity and set your sights on properties in that price range. However, it is vital that your purchase is right for your lifestyle and considers all the hidden costs of property ownership.
Get Level-Headed About Your Budget
A realistic property budget is often quite different from your maximum budget. Banks and financial institutions will be able to work out your maximum borrowing capacity, however, it comes down to you to decide what you should actually borrow. Some important tips to consider when determining how much you should borrow are:
- Employment security: how secure is your job? Is it likely to change any time soon?
- Your personal circumstances: are you planning to start a family? Are there any pre-existing health problems that could alter your opportunity to work for a period of time?
- Current lifestyle: are you willing to forego your annual international holiday, or regular Friday night drinks? How much of your current lifestyle do you want to keep and how much are you willing to let go of?
Bigger isn’t always better
Over the last 30 years the average new build house size has grown by 40%. Buying a smaller house without the fifth bedroom, or third lounge area, may mean that a comfortable home is balanced with a comfortable lifestyle
Interest Rates in the Future
Australian reserve interest rates are at the lowest they have been in most of our lifetimes. It is unreasonable to think that this can continue throughout the life of your mortgage. Take a good look at what different rises would mean for your financial situation and make sure you have enough flexibility to endure any increases
A financial safety net is possibly the most basic of all home loan rules. Even the most skilled budgeters cannot plan for every conceivable change to a person’s circumstances. Aiming to have three months worth of expenses saved will be vital if illness strikes or your currently employment status changes
Income and Mortgage Protection Insurance
Income or mortgage protection insurance are a great option for financial coverage if an unforseen illness or injury occur. Both options pay a percentage of either your income or your mortgage until you’re able to get back on your feet
You Pay for More than What You Buy
When you buy a property it is easy to think that the sale price is the final price. On top of a sale price are stamp duty, legal feels, and often the pro-rata amount for council rates until the end of the financial year. Transferring utilities can also add to the amount quite quickly, so make sure you’re prepared
Learn how a buyer’s agent can create ease in finding your next home, talk to the friendly team at Wise Real Estate Advice for more info.
20th of July, 2016. By Mark Ribarsky