Buying a home is one of the most important purchases in life. It is a very expensive proposition, so you're likely to have to look into taking out a mortgage to pay for your home. Borrowing vast sums of money is very threatening so this blog will give some guidelines on just how much you can afford so you don't lose too much sleep over it.Firstly, you'll need to have an income. Once you have that, here are some guidelines:
- The payments you make to pay off your debts in a year should not exceed 25% of your gross annual income. You can stretch this up to 31% but you'll have to sacrifice your standard of living.
- You should pay off your loan before you retire, so best to use an amortization period that ends before your retirement. You can stretch your amortization to keep your payments low, but you will need to continually push towards higher incomes so you can pay off your loan quicker. Don't stretch if you don't want the added stress.
Hopefully, these guidelines will help you manage your debt in a way that'll leave you some breathing room to sustain a decent lifestyle.
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3 comments:
Nice post Abes! I think how much a mortgage really costs is something that many people don't really plan out properly. When I was sorting out my mortgage, I worked out exactly how much I could "realistically" afford. I then looked at online price comparison sites like eComparison to see what was the best deal I could get.
Good on you, Helen! Too many people jump into mortgages without thinking things through first.
You also bring up a good point about comparing prices. It's important to search out the best price you can possibly get. eComparison looks like a very convenient way to price shop.
For folks who are too busy to do their own price comparison, try signing up with a mortgage broker. There's no charge for using their services.
There are many type of loans available in the market. Its very important to examine all your options first before settling with your final choice. Thanks for the info!
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