Have you ever daydreamed about having your perfect home in the ideal location?  Or maybe you’ve been hoping to embark upon a lucrative investment portfolio.  While these musings may get your pulse racing, you still need to ask yourself just how much of this sort of outlay you can actually afford.

I hate to say it, but once again, the banks seem to have the upper hand.  It is up to them to determine your borrowing capacity and to dictate the terms of their lending agreement.  It’s certainly advisable to gain an understanding of the kind of loan you can comfortably repay.

With most household budgets under pressure, how do you find enough room between the purse strings to make ongoing mortgage repayments?

You can take several preliminary steps to work out what you can afford.  Let’s look at a few of the basics.


1. Balance income and expenses

It’s fairly self-explanatory – work out how much money you currently earn, and deduct every cent you spend.  This includes any outstanding debt, such as credit card payments. Be ruthless.  Are you wasting money on unnecessary sundries?  Could you make a few adjustments?  Keeping a thorough account of your incoming and outgoing finances is paramount.


2. Use an online calculator

A mortgage calculator is a nifty tool that can help you better understand your financial situation.  It works out your estimated loan amount, monthly repayments and upfront costs.


3. Check your credit rating

Your credit score can affect your borrowing power.  A lender needs to factor in your ability to meet potential repayments on other loans, and whether you have applied for credit in the past and potentially defaulted on any payments.


4. Don’t forget about interest rates

Lower interest rates are a great incentive to service a loan at a lesser expense.  It usually means you can borrow a little more too.  However, you should also be aware that an increase in rates could significantly impact your repayments.  And once you convert to principal payments on top of interest, you could be hit with more than you can handle.  A lender will factor all of this into the equation.


5. It’s good news for savers

The bigger your deposit, the more you can afford.  Savings, gifts and equity on your existing property will all work in your favour.  If you can borrow under 80% of the home’s value, you’re already ahead.  Needing to borrow any more than that will require you to take out lenders mortgage insurance.


Of course, even without insurance, there will always be other expenses to factor in such as stamp duty, legal fees, agent fees etc.

That’s a lot to consider.  A property purchase can be a life-changing event, and you should approach it with caution.  But if you’d like a way to pay off your mortgage sooner or fast-track your investment portfolio – without all the extra expenses – GSA has the answer.  Call us to find out how.