The conditions for buying a property at the moment can be described as promising. With the impact of the Reserve Bank’s decision to cut the official cash rate still fresh and the 2015-2016 federal budget set to provide a boost to housing supply across the country, there are plenty of opportunities to join the throng of Australians planning to start or extend their property market experience.
In fact, a new survey from Roy Morgan Research shows that there are around 300,000 Sydneysiders intending to buy or build a house over the next 12 months. If you are one of these prospective purchasers, you might be wondering how you can afford a home loan. But you needn’t worry – here’s how you can transform your real estate ambitions into a tangible asset.
Set yourself a limit
Given the average price of a home in Sydney has ballooned almost 14.5 per cent over the year to April 30 according to the CoreLogic RP Data Daily Home Value Index, working out how much you can afford to borrow and repay requires thorough budgeting and a number of careful calculations. After all, the last thing you want to do as a mortgage holder is overreach the balance on your savings account and end up in fiscal strife.
To give yourself the best chance of meeting your repayment obligations further down the track, you should set some firm limits. These need to be based on your current financial situation, which means thinking carefully about your income and expenses. Can you afford to regularly make repayments, as well as other day-to-day expenses and bills? As a general rule, repayments should ideally be below 30 per cent of your gross salary – any more than that and you could get yourself in hot water.
Flexibility is key
Once you’ve determined how much you can afford to borrow, you can start to think about the future and planning accordingly. A good budget should be sufficiently detailed to set a roadmap for your spending and saving, while being flexible enough to adapt to rising costs or changing circumstances.
For instance, you should allow for increases in electricity or other utility charges, or even fluctuating interest rates. Don’t forget about your personal situation, either. Are you planning on starting a family? Or do you have a flare for renovations? Each of these elements can have an impact on your ability to afford a home.
The next step in your property buying journey is finding the right loan to suit your circumstances. For more information on this point, as well as helpful advice, make sure to get in touch with Border Bank’s home loan professionals.