Tips to Calculate Your Property Buying Budget
What’s the key to successful property purchase?
Well, if you have seen any experienced property buyer, you might be aware of how do they do it. Not just the sale price, written on the purchase contract; rather, a seasoned buyer will consider the total financial commitment while acquiring a real estate property. Moreover, a wise buyer will also take in to account all the ‘extras’, such as stamp duty and legal fees, any improvement costs and expenses associated with management of the property that eventually takes the property price higher. The only key to successful property purchase is to be prepared, knowing what to expect, plan, and then budget accordingly. Since, no one ever want to be dealing with potentially costly surprises on the settlement day.
Thus, here are some expert tips to help you calculate your property buying budget –
How much you have as genuine savings to contribute towards the deposit.
Your cash reserves and things like equity, rental income, any lines of credit or the potential to raise funds through the liquidation of an existing asset will influence how much you can ultimately borrow.
When reviewing your savings, it’s a good idea to seek help from an experienced mortgage broker who knows about everything that you can contribute as per the requirements of different lenders and their respective criteria.
- How much can you borrow to buy a property you wish?
Your capacity to borrow is calculated by assessing your income, monthly expenses, old debts, credit card payments as well as the criteria set by the lender. When you your borrowing limit, you can shop with confidence within your buying budget. Your borrowing power also depends on how much loan a lender will approve based on:
How much you can deposit, including current income from work, other sources, and other assets.
How good is your credit history? Which is why it’s essential to know if you have a clean record or need a bit of a tidy up.
- How much you need to spend extra other than the purchase price.
After knowing your borrowing capacity, next is to conclude how much money is required extra other than the price of the property. Apart from the price of the property, you will have to bear some extra expenses in the form of stamp duty, legal fees and any costs that might come with a planned upgrade to the asset, such as minor renovations or refurbishments to make it more rentable. Around 5 to 10 per cent of the purchase price will generally cover up those extra expenses.
If you want to know more as per your individual situation, talk to the experts at Loans Direct.