Hunting for a new home in a hot market can be challenging, to say the least. But have you considered how much you can afford to borrow first? When borrowing money to purchase a property, the amount you can borrow will depend on the size of your deposit, and what you spend.
Calculate your spending capacity. There’s always a difference between what a bank is willing to lend you and what you can afford to pay.If you’re buying in a Lendlease real estate in Perth Australia or any other location for that matter,your first step when considering how much you can afford to borrow is to draw up a budget.
Write down your monthly income and then assess for all your expenses. This will give you an idea of how much you are already spending each month, as well as how much you have left over to put towards a mortgage.When creating a budget, always allow for a buffer for unforeseen expenses and interest rate changes.
To calculate your borrowing capacity, consider your expenses, currentincome, any personal debt and the type of loan.
Here are some tips to remember:
- Income: The general rule that analysts follow is that payments shouldn’t be more than 35% of your gross income.
- Expenses: Create a list of present and future expenses, considering things like having children, the financial consequences of unforeseen events such as job loss, and interest rates either rising or falling.
- Loan: The loan total will dictate your monthly mortgage settlements so be cautious of overstraining yourself. The larger your deposit compared to the loan amount, the lesser the payments will be. You can use a home loan calculator to know how much you will likely be repaying each month.
Ensure that you’ll fit the lending criteria. The lending criteria vary greatly between banks or mortgage providers. It depends on factors such as the current state of theeconomy and the size of the institution itself. Here are the common lending criteria:
- A minimum deposit based of the loan-to-value (LVR) of the loan. LVR is the amount of money you can borrow based on the value of the property.
- Your employment status and current income.
- Previous personal debts and credit card limits.
- Your savings history or prior repayments history for any other loans.
If you meet these criteria or other criteria set by the lender, the lender will be able to tell you how much you’re able to borrow from them. Now it will be up to you to work out if this is controllable with your current lifestyle and income.
Mortgage and lender fees. There’s so many loan types and providers available and they come with their own set of fees and charges, which includes service fees, Lenders Mortgage Insurance and fees for other features. Check with your lender any applicable fees that you need or will need to pay.
As purchasing a homeis a painstakingly complicated yet exciting process, choosing a good property in an equally good neighbourhood should be a major concern. Buying a real estate property in Perth Australia, particularly in new communities such as Alkimos Beach and top-market areas will ensure that your hard-earned money is well-spent.
Again, how much a bank will lend you will depend on your unique financial situation. Take note that a financial advisor can help assess how your loan will impact your finances, while a mortgage broker will assist you in finding the best deal on a home loan.