The Great Australian Dream of property ownership remains relevant to this day, but it can be hard to attain. While the house and land packages around West Melbourne other thriving communities in Victoria are desirable, they are usually out of many people’s reach.
If you have been renting forever, you probably wonder if your current financial standing may finally permit you to buy a property. To determine whether you can afford a house and land package in a sought-after suburb, look for the signs below.
You Can Pay at Least 5% of the Property’s Value Up Front
Usually, the maximum amount you can borrow is 95% of the purchase price. This means you need to pay a 5% deposit to cover the remaining balance yourself.
Ideally, your deposit should come from your “genuine savings”. The funds most lenders consider as genuine savings are those held in a savings account over three months. Your rental history can also be categorised as genuine savings, but you might need to look for other sources of money to pay the minimum deposit.
You can use a monetary gift from your parents to beef up your deposit, but you can’t use it to satisfy a lender’s requirement for genuine savings.
The whole point of producing enough deposit and proving you have adequate genuine savings is to assess your liquidity. If you struggle to do at least one of them, maybe you are not yet r
You Have Enough Net Income for Monthly Mortgage Repayment
If you have sufficient savings in your bank account, turn your attention to your net monthly income. It should be large enough to cover your perceived payment for your mortgage.
The tricky part about it is that there is a lot of uncertainty on how much need to pay every month on a mortgage. It depends on how much money you are allowed to and will borrow, your interest rate, and your loan’s term.
Getting pre-approved is good practice. A pre-approval cannot guarantee everything, but it can give you an idea of how much a lender will loan you. Knowing your maximum purchase price can help you calculate your monthly mortgage payment more accurately.
Your Career Is Heading to a Prosperous Direction
Taking out a mortgage is a decades-long obligation. You need the foresight to assess your financial capacity five, 10, and 15 years from now.
Make sure you have stable employment and see whether you are likely to get any raise eventually. If you are applying for a mortgage with your spouse, evaluate your long-term earning potential thoroughly before talking to a lender.
Your Income Is Not Likely to Decrease Soon
Anticipate any event that can affect you and your spouse’s capacity to repay a mortgage down the road. For instance, having a baby can drive your corporate income lower down the road. A lender may not ask you about your family plans, but you should because you can lose your house to foreclosure if you do not prepare for significant future expenses.
What you think you can afford may be different from what a lender believes. Compare different home loans, and find out each one’s requirements to enhance your credentials as early as possible.