Buying a house? Work out your borrower profile!

Date: 10 July 2014
Buying a house? Work out your borrower profile!
If you're in the market for a residential property, whether for you and your family or as an investment, chances are you'll be borrowing.

This leads to one of the most important questions all home buyers must answer: How much can I borrow?

Like most things in life, the answer is a bit complicated.

Possible versus practical

Exactly how much you can borrow may not be the same figure as how much you should borrow.

Your first order of business should be to figure out how much you can comfortably repay. Neither you or your lender will want you to default on a loan, so work out how much money you'll be able to part with each month for loan repayments while still leaving yourself enough to live on.

Getting four-fifths help

Once you've determined how much money you can safely borrow, you'll need to start saving for your deposit.

Most lenders will only allow you to borrow up to 80 per cent of the value of a home, meaning 20 per cent will need to be paid by you.

Keep in mind that you may be able to obtain a loan worth more than 80 per cent of a property's value, but this will likely come with other costs attached, such as lenders mortgage insurance.

What you bring to the table

Of course, the value of your home won't dictate how much money your lender will make available.

Before deciding how much money to lend you, banks and other financial institutions will take into account factors like your income, credit history, debt obligations and fixed expenses.

With that in mind, it's never a bad idea to work on saving and building up your financial profile before borrowing. Taking care of your finances can help you obtain a larger loan more quickly.
Back to articles Filed under: Media / National News Tags: buying, finance, first home buyer, first home owner, home loan, how much can i borrow?, mortgage, tips for buying
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