The Affordability of a New Home Purchase

“There has been much recent public discussion about the rising price of… homes, and concern that an increasing number of families are [being] priced out of the… home market.” – John C. Weicher.

Are you looking at purchasing your own home? Do you need to take out a mortgage bond in order to fund your new purchase, or are you one of the few fortunate people who are able to purchase your home cash? Are you considering renovating the house once you have purchased it? The fact of the matter is that people are not the same; therefore, it goes without saying that there will be elements of the home that don’t work for your family, and you would like to change them.

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Budgeting for the repayments

It is important to take cognisance of the fact that the actual purchase price of your chosen property is not the only cost linked to the overall costs involved in the acquisition of your home. You will probably need to renovate parts of the home, purchase new curtaining to fit the windows, and you might even have to buy new kitchen appliances. The list is endless; however, the most important question that you need to ask is what you can afford to pay out both for your mortgage repayments and your renovations.

My experience is that, unfortunately, most people do not pay the requisite attention to their bank accounts that they should do. Your monthly salary will be paid into your bank account by your employer and an infinite number of payments will be taken from your bank account each month. Needless to say, it’s easy to end up in a situation where more money is being paid out every month than what is received every month.

How do you remedy this?

Fortunately, there is a nifty little app that generates pay stubs online; thereby, keeping track of all of your taxes and sundry deductions. This pay stub will accurately calculate what your employer will pay into your bank account every month. All you need to then do is to total up all of your other monthly payments; consequently, you will soon see how much you can afford to repay on a mortgage per month.

Why do you need to make these calculations yourself?

This is a good question to ask. There are several reasons why you should make these calculations yourself and not rely on a third-party to determine how much you can afford to pay for your dream home.

The most important reason is that you will have calculated your maximum figure that you can spend on a home before you contact a real-estate broker. This will save you both time and heartache. There is nothing worse than spending hours looking at houses, finding your dream home, and then being told that you cannot afford the monthly repayments.

The second reason is that your mortgage broker or bank might say that you can afford more than you realistically can afford. It is a very good idea to leave a month cushion in your bank account for emergencies as everyone knows, there are always emergencies.

Final words

Buying a new home is an exciting time in every prospective homeowner’s life. It’s a time full of hope and promise for the future. This is probably the primary reason not to over-budget for your monthly mortgage repayments as it can end up in unnecessary heartache and financial loss.

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