Lenders tend to look at a couple of different – but very important – things when considering home loans for people around Australia. By learning about these criteria, you can avoid getting into a mortgage that you can’t really afford. Being realistic about your finances is incredibly important when buying a new home, and can save you a lot of grief in the future.
Pay close attention to the type of criteria different lenders are looking for as this will give you a good guide toward what level of investment you can afford and how much money you should borrow.
Your Income –
If you are looking into Brisbane conveyancing, or property transactions elsewhere in the country, the first and most obvious determining factor behind how much you should borrow depends upon your monthly income. Most experts say that you should be able to comfortably repay your loan every month i.e., that you shouldn’t have to scrimp and save just to make your mortgage payment. A good rule of thumb when it comes to figuring out what you can afford to pay is to aim for a monthly loan payment that is no more than 30% of your pre-tax income.
Your Other Financial Commitments –
Many financial considerations come into play, including your total monthly income, when determining what your maximum borrowing capacity should be and how large your loan should be. If you are considering purchasing a property in lets say, Gold Coast, make sure that you realistically look at what kinds of financial commitments you currently have to determine whether or not a particular loan is right for you. Many lenders take into consideration credit card debt and consider any outstanding credit card debt seriously. There are other types of financial obligations that lenders will also look at, and that can play a role in how large a loan you can reasonably repay.
Interest Rates And Fees –
Make sure that you make very conservative estimates when determining the size of the loan that is right for you. Do not assume that interest rates will stay within a comfortable range; even if you don’t have a variable rate loan, they can still affect you in the long term. Add a 2% interest rate cushion to your estimates to stay within a comfortable zone. Also, do not forget to take any miscellaneous monthly fees into consideration; make sure that those are counted in the total, so that no unpleasant and unaffordable surprises rear their heads in the future.