How much can I borrow? This is the question the majority of us ask when we consider buying a house. Although a valid question, once we know the amount, we then tend to look for properties around this maximum lending amount.
The process of buying a house can be very exciting and we tend to get swept up in the emotion without taking time to consider the impact repayments will have on our lives. One of the largest factors we tend to overlook is lifestyle.
The kind of life you lead or want to lead, should be a high consideration when looking to buy a house, as the amount of repayments will take funds away from other activities. This will be highly individualised, but you need carefully consider what your future may hold and the lifestyle you want. Some examples of factors to consider are:
- Travel – Do we want to continue to have the ability to have regular holidays, weekends away etc
- Children – Are you planning to increase your family
- When do we want to be debt free / Retirement
- Future Capital expenses – New car, etc
- Lifestyle habits – Eating out, memberships, social outings
Once you start to consider these other costs in your life, your mindset will start to shift from how much can I borrow? to, how much are we willing to borrow? Talking about what you will have to give up or reduce in order to borrow a higher amount of money, will allow you to start to weigh the pros and cons of taking on a loan. For example, if you love to travel, are you willing to give this up or reduce it in order to have a more expensive house.
The best way to make an educated decision is to work with your mortgage broker and discuss the loan repayments associated with a range of different loan amounts, while considering the additional costs of home ownership in order to make a decision that suits your lifestyle. In addition to this you should consider if interest rates are to increase how will this impact your cashflow.
By taking a lifestyle approach to home ownership you will be able to make a more informed decision that suits your individual needs.
