When buying your first home, your budget will usually be based on how much money you can borrow.
The best place to start this conversation is with a loan specialist or mortgage broker. Even if you don’t have a lot of savings behind you just yet, they can advise you on:
How much more savings you need to accumulate, helping you to set your savings goal
What grants, incentives and schemes are available to get you into your first home, faster
What types of fees to be aware of and to include in your calculations
How Much Can I Borrow?
One of the questions we get asked the most!
A loan specialist or mortgage broker can run this calculation for you once we know your:
Income - how much you earn and in what way e.g. self-employed, employed, contractor, casual, rental income, investment income etc.
Assets - what you own e.g. savings, property, investments etc.
Liabilites - what you owe e.g. existing loans, credit cards etc.
Expenses - how much you spend each month
Credit History - whether you have any defaults, impairments or bankruptcies
Once we have all of this information, we can provide an estimate of what lenders are willing to lend you. At BPW Finance, we go out to a panel of over 60 lenders to see what is on offer for you.
Should I Borrow the Maximum Amount?
The answer to this will vary depending on your situation.
If the repayments for the maximum amount tighten your budget and don’t leave a lot of wriggle room for the prospect of increasing interest rates, inflationary pressures on living expenses, savings and emergencies, then we certainly would not recommend it.
However, if you do have a buffer, it might be an option.
How Do I Know If I Can Meet My Repayments Comfortably?
The best option here is to put together a budget.
Having an understanding of how you currently spend your money is the first step. At BPW Finance we have software that categorises your spending so you can see where your money goes each month. If you are interested in using this software contact me today and we can start to categorise your spending, identify areas for change and set up your budget. It will show whether you have room for a mortgage repayment.
How Much Do You Need For A Deposit When Buying Your First Home?
Firstly, what is a deposit? The deposit is your savings contribution towrd the purchase of a property.
Typically, this is 20% of the purchase price plus purchase costs. However, it is possible to buy a home with a deposit as low as 5%.
One of the advantages of purchasing a home with a larger deposit is that you will take out a smaller loan with smaller repayments and will be offered better interest rates by the lenders. You will also own more of the property personally, meaning you will have more equity in the property when it comes time to move or upgrade in later years.
However, you can also purchase a property with a smaller deposit. For more information on how to purchase a property with a smaller deposit, see our blog article here.
Check out our next blog post, where we will provide some guidance on how to save for a deposit, how to cut back on your expenses when saving and the hidden costs of buying a home.
And as always - feel free to share this with anyone you think might find it of interest. And get in touch with me at any time by sending me an email or booking an appointment for a free phone or video call using the button below.