Thinking about breaking into the property market, but don’t know where to start?
One of the first steps in the home buying process is figuring out where you stand financially and what you can comfortably afford to pay each month on a mortgage. While this isn’t a particularly fun task, the sooner you’re aware of your financial situation, the sooner you’ll be able to start searching for your new home.
Track your spending habits
Before signing up for a mortgage, track your spending and see if there is anything you can cut back on to help improve your financial standing, and potentially your borrowing capacity too. Track everything from rent to morning coffees and look for ways to save. Perhaps you can cancel your gym membership? Or maybe it’s worth you cancelling your credit card? Even the smallest expenses can add up over time, so without them you can save for your home deposit faster.
Understand your own finances
A lot of people talk to a lender to get an understanding of what their income will allow them to borrow, however it’s important that you don’t rely on them to do all of the hard work for you. It’s worth sitting down and educating yourself on the various loans and products available and how they can each have an impact on you and your spending habits. Having a chat to the team at Professionals Finance is a great place to start.
It’s also really important that you get a solid understanding of how you will be impacted financially by having a mortgage so you can figure out what you can comfortably afford to pay each month.
Don’t forget to keep a financial buffer
A lot of people add up their rent and savings when trying to figure out what they can afford to spend on their monthly mortgage, but this doesn’t take into account the extra expenses that can come with home ownership. These expenses could include things like moving costs, insurance, council rates, maintenance and utilities etc. Also allow for interest rates to rise too.
It’s best to be conservative when calculating what you can afford so you don’t end up under financial pressure later on.