Budgeting For Your Home
Every home buyer would like to get the best deal possible while purchasing their home, since it is both a place to grow with the family and also an future investment which the value will increase in the future. Many individuals who are buying a home for the first time would like to have a large budget which will allow them to purchase many of the properties available for sale in their favorite locale in the city or town they love. However, in reality, the HOME BUDGET depends to a large extent on how much money the home buyer can deposit upfront while purchasing the home, and also how much money he can borrow from various sources towards purchasing that home.
It is recommended that the home buyer discusses the budget for any prospective home purchase with a mortgage broker or lender before starting out looking to purchasing one. Even if the home buyer has not saved a large amount for making the initial deposit required for home purchase, lenders will usually be able to provide information on the kind of deposit required for the type of property the buyer will be able to purchase. This will give direction in planning to buy a home, with the financial and other goals they wish to achieve. The advice of the lender may also help the home buyer modify his plans for the house because the dream house of the home buyer in his preferred locality, may be in fact a dream and cost far more than one is able to afford. This especially applies when purchasing a home for the first time.
Loan Amount for a home buyer
To determine the amount which a home buyer can borrow to purchase a home, he will have to speak to a mortgage broker or a lender like a building society, bank. The lender will calculate the maximum amount of the loan which the home buyer is eligible for, based on a number of factors, like the income, savings of the persons, expenses, assets and the credit history. Though the amount of the loan will usually be similar for most borrowers, there may be some differences in the formula used by the lender for determining the loan amount, based on their experience with different home buyers. In case of new properties, the lender may have a deal with the builder constructing the property who will offer a better loan deal or terms – especially when purchasing properties’ off the plan’.
Though the home buyer may be eligible for a large loan amount, it is usually not advisable for the home buyer to borrow the maximum amount he is eligible for. Being aware that the monthly or periodic mortgage repayments are usually higher for larger loans it is imperative to ensure that there will be sufficient income and available funds to make these payments. There are other expenses which purchasers should take into consideration like council taxes, insurance and strata fees, which can be a substantial amount as well as ongoing expenses after purchase. One must also take into account living expenses like food, drink, entertainment and allowing a little to pamper yourself with a beauty or hair treatment. It is better to be safe than sorry and allow for unexpected contingencies.
The home buyer should compare his income after taxes with the estimated cost of owning a home, and also consider other household expenses. Most families have to pay for groceries, utility bills, schooling, transport and leisure. If the home buyer calculates that only a small amount will be left for some of the non essential expenses like going on a holiday or dining out, the home buyer can consider taking a smaller loan. The other option for the home buyer is to lead a frugal life to reduce the expenses since he now owns a house, till his income increases or the debt is reduced.
It is highly recommended that the home buyer should undergo a “test” to determine his financial limits. For example, the interest rate on the home loan may increase by one or two percent, and the home buyer should be able to pay the additional amount by factoring this in. Though the job of the home buyer may appear extremely secure at present, anything can happen in future and circumstances may change due to illness or industry decline. Ensuring that there is sufficient money for mortgage payments for a few months, even if a job is lost or there is no regular income. When purchasing a home the buyer should budget for his dream home, considering the worst possible scenario, so that his home remains secure in the face unexpected difficulties.