To avoid costly mistakes, trust finance and real estate professionals. (Photo – courtesy)
Visiting a property that interests you can be a very exciting time! However, your enthusiasm should never make you lose sight of your financial situation. In fact, being eligible for a mortgage loan is not enough: you must also ensure that you can faithfully make your payments over the next 15, 25 or 30 years, whatever life’s unexpected may be. Here are some things to consider to avoid trouble!
The rule of thirds
According to several financial advisers, it is best not to spend more than a third of your net income on your mortgage payments. Even if you are currently in a position to assume larger payments and your lender agrees to modify your agreement accordingly, it is more prudent to keep yourself comfortable in the event of problems. Some suggest instead not to exceed 25% of your remuneration, which means for example that monthly payments of $1250 are only possible if you earn a net salary of $5000 per month.
Total debt
All of your debts must also be taken into consideration in order to obtain a realistic picture of your ability to pay. Financial institutions take this factor into account to determine the amount you can borrow. For example, if it turns out that the sum of the mortgage payment, the car payment and your credit cards takes away half of your net monthly income, the risk will be judged to be too high.
Other costs
Always keep in mind that a house does not only involve a mortgage, but also other expenses related to maintenance, repairs, municipal taxes, etc. So you have to think about it when doing your calculations.
–
