A home loan is a very big commitment, so it’s wise to make sure you know the reality of what you’re getting into. Check you’re entering into it with your eyes wide open.
Buying a home is one of the most significant purchases most people make – and home loan repayments are among the biggest costs. You need to ensure your home loan repayments are manageable in practice, not just in theory – and you still have savings set aside for some of life’s little luxuries. Carolyn Bray, Head of Credit at Macquarie’s Banking and Financial Services Group, shares some tips to ensure you achieve the perfect home loan–life balance.
1. Understand your cash flow and budget before taking on a home loan
“One of the fundamentals, even before you think about taking on a home loan, is understanding your cash flow and budget,” says Bray. “Before you think about purchasing, you need to know what you’re earning and what your cash flow is on a monthly basis. It will help you understand the type of property you can afford.”
Also, before you leap into buying property, remember the purchase price isn't the only cost. Stamp duty, legal charges, inspection reports and removalist fees can add up quickly. Those extras can be included in your mortgage amount, but be sure to factor them into what you can afford. It's also wise to build in a buffer, so you're not under stress if interest rates rise.
2. Be realistic about future expenses, too
Expenses don’t end with the purchase of a house. You can never know what the future will hold – so don’t just plan for the ‘best-case’ scenario. In addition to the extra bills you’ll pay when owning a home, compared to renting, you need to factor in maintenance costs, too.
“Also it’s smart to have something in place for the unexpected - whether it's illness or injury,” says Bray. “You have to be realistic about that.”