How much house can you afford?
You and your wife are buying a home, what home loan should
you consider? Weíve given you an equation to work it out. Very
simply, the major banks will give you up to twenty times your
combined monthly salary. What else should you consider? Keep an
eye on these important factors:
1. Future interest rate increases The vast majority of bond foreclosures
occur during times when interest rates are high and monthly installments
become unmanageable. Very few families can pay more than 25% of
their monthly income on bond repayments. Thatís why banks put
their lid on at this percentage. Consider taking a loan for less
than you can presently afford, you may come to be grateful you
2. Possible salary reductions Most peopleís salaries donít decrease
but if youíre self-employed, work on a commission basis or have
any other form of uncertain income, make allowance for a possible
downturn in the future. Will your wife continue working for the
next ten years? If not, allow for the future loss of monthly income.
Give yourselves some breathing-space.
3. Increased future expenses Another good reason for taking a
home loan for less than you can presently afford. It may be your
childís future university education, repairs to your home, higher
levies or rates, and other similar burdens. Some foresight and
wisdom now will hold you in good stead at any future time when
your spending power may be less than it is now.
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