A reader on Yahoo recently sent me an important question that must be front of mind for most first homebuyers when making the leap from renting, or living at home, to home ownership: how do I find out how much I can borrow?
“I am thinking about borrowing to buy my first house and I do have some credit card debt and a car loan but I have a pretty good job. That said, I want to know how much I can borrow so I can work out what kind of house or apartment I can afford and importantly, where I can afford to live. Can you give me a rule of thumb? “
Here are some old and trusted rules based on the safe way of borrowing. If your home loan repayments cost more than a third of your take home pay, you could feel the pinch.
The best advice I can give is to go to the FIDO website - www.fido.gov.au - and have a crack at their Budget Planner. This will make you put your money life on the lawn, so to speak, and this should help you decide what home loan you can afford.
If you don’t think you can drive an old car and hold back on buying new clothes all the time, then you better think about borrowing very conservatively or avoid it altogether!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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