When you think of buying a home, you generally have no idea where to start from and what to do next. Therefore, planning is very important. More importantly, you need to know whether you are ready to buy a property in the first place!
I would give you a few points, a little bit different from what people generally think, and I hope this will make sense to you.
1. Find out how much is your household living expenses and project how much would this be after buying the property. Household living expenses cover for food, travel, personal care, medicines, clothing, childcare, education, training, holiday, etc. and this is generally to keep your family daily life going.
2. Find out your current commitments and whether they are going to continue after the property purchase: This includes credit card payments, car loan / personal loan payments, overdraft, any other liability for which there would be an ongoing payment. If you have a plan to buy a new car on a loan after moving into your property, you need to consider your future repayment into this calculation.
3. Holiday expenses: I don’t need to tell you how important it is to taking days off and spending on holidays. Yet, many people forget to allocate enough budget for this or don’t have time to take holidays! For example, if you plan to go back to your home country once every 3 years and spend $12,000 during that visit, you should be allocating $4,000 per year towards it. Many people fail to put this into their calculation and this can result in a little bit stretching of their financial position after buying a property.
If you have enough resources to cover for the above expenses and can also meet the loan repayments that you are going to borrow money for, then you can consider obtaining a mortgage. Please note that bank interest rates can go up and down at any time. If it moves against you, then you should be prepared for this increased repayment as well.
Generally, many first home buyers who come to us for assessment of their financial position find themselves in a comfortable position to pay the mortgage and to cover for other expenses that we discussed above. However, we always encourage you to borrow sensibly and borrow what you can comfortably (not the maximum limit you can potentially borrow) afford. We also encourage buyers to exercise caution in selecting a location so that it fits into their lifestyle and cash flow position.
Again, there is nothing wrong nor is there anything we could call the right approach. The only outcome we aim is to make sure that you have enough resources (time and money) left to enjoy your life even after getting the mortgage.