Taking out a mortgage is a BIG decision with long lasting implications- so you need to approach borrowing well informed and with a healthy attitude.  The key essential is to work out what you can afford and what repayments you feel comfortable with, regardless of what a lender will offer.

To establish your borrowing capacity, start by measuring your income against expenses, including potential mortgage repayments.  While everyone’s circumstances and expenses are different, a good rule of thumb is that no more than 35 per cent of your gross monthly income should go towards servicing your mortgage.  Lenders will also need to assess your circumstances to work out how much to lend you.  As a general rule, the bigger deposit you have and the higher your income, the more they should be willing to lend.

Here are some factors to take into account when determining how much you should borrow.

HOW MUCH DEBT CAN I HANDLE?
Don’t over commit.  Borrowing too much can be a big strain on your personal life and lifestyle.  Think about what aspects of your lifestyle you may be willing to give up, and those you can’t.

AM I BEING REALISTIC?
Houses are like stepping stones – it’s probably best to start with something affordable and move towards your dream home as your personal earning capacity and equity grows.

WHAT ARE MY PLANS?
Think about what the future holds – both personally and financially.  Are you a one or two income household and is this likely to change in the future?

WHAT ABOUT INTEREST RATES?
Consider how any rate rise will impact on your ability to make repayments and factor that in when setting your borrowing limits.  And don’t forget, there are added extras when purchasing a house, for example stamp duty and mortgage duty, relevant property inspections, solicitors and application fees, as well as ongoing commitments including council rates, possible strata or body corporate costs and utility bills.  Consider these costs when determining how much you can borrow.

Your Caveo Partners Finance Adviser can guide you through and help you work out what best suits you and your circumstances, now and in the future.  Contact us today enquiries@caveopartners.com.au or phone 8201 8333