Purchasing your own property comes with the freedom of having a house that you can call home. However, it also comes with various costs beyond the price tag that needs to budgeted for so that you don’t strain your finances. This guide will help you create a budget that can help you shoulder the expense of purchasing a house.
1. Look at your current income and expenses
To avoid buying too much house that can mess up your finances, check your current income and the expenses. Take into an account every single expense that goes beyond the housing budget such as travel expenses, medical expenses, policies you are paying for and more. You can then create a budget that will take into account repairs and expenses that will come with the new house to see you will be able to comfortably afford it.
2. Calculate how much you can afford for a loan
According to the Australian Bureau of Statistics, first home buyer commitments rose by 18.0%, with the average home loan size being $341,600. Knowing what you can afford in terms of a home loan is vital to setting up a home buying budget. This is why it is important to compare home loans and use a home loan calculator to check if you will be able to comfortably meet the repayments. Although a loan calculator only acts as an estimator of how much you can borrow, it can still give you a good idea in terms of what you can afford. You can also get a pre-approved loan to know what your borrowing power is.
3. Create a buffer
Life happens. Which is why creating a financial buffer such as opening a saving account designated to take care of your house expenses or emergencies that may pop up can be useful. ASIC found that 46% of Australians have a savings account already open to handle rainy day expenses. Remember to consider a buffer if your mortgage were to increase by 2%. This can help reduce the strain of unexpected costs.
4. Be realistic by researching
You may already have a few must-have features that you are not willing to compromise on when you have a home. To see what you will be facing, do some research online. Compare houses that have similar features within the neighbourhood you are interested in to see where you can find one that is priced right for you. This process can also help you during the negotiation process as you will be approaching the table with realistic expectations, and you will know when to compromise.
5. Speak to a mortgage lender
Seeking financial advice from a mortgage lender or a broker can be one of the best things that you can do, especially if this is your first time buying a house. Not only will a mortgage lender be able to tell you what you can comfortably afford in terms of your loan, but they will also be able to show you options that will cater to your budget.