How much can I afford for my first property
First property purchases
The excitement of buying your first property can be overpowering. There's the thought of having something that's yours, the social pressure of having a nice looking property and then the pressure from the estate agents to aim for that bigger and better property. The whole experience can result in many people buying a house they can't or can barely afford.
Don't break the bank
If you want to live a life where money is not a stress then you need to focus on the biggest outgoings, one of which is the monthly mortgage payments. As I've said previously in my article about assets you don't want to be in a situation whereby your mortgage payments creep above 30% of your monthly net income. This allows you a lot of flexibility if there are emergencies, or if interest rates go up and then you suddenly find yourself paying more each month for the mortgage.
How much should you spend on your property?
There are those who would disagree with me. Nevertheless here's how I would do it:
The first step is to figure out all your expenses. That includes anything that you will be including in your pension and savings. Make sure that you add up all your monthly outgoings such as bills, food, going out etc. For any spending that it a little more sporadic throughout the year, divide the annual cost over the twelve months. Make sure to exclude any costs associated with your current housing costs such as your rental payments.
Now whatever that figure is, it should make up about 70% of your current net income (income after tax had been paid). Take you net income figure and minus your total expenses figure. The remainder is the monthly amount you can afford to pay towards your monthly mortgage costs. I would strongly urge you not to take out a mortgage that would result in higher monthly costs than this otherwise you may need to cutback in other areas and put a strain on your current lifestyle.
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Do you like what you've read? Tell your friends by sharing it with one of the buttons below. Please post this to Facebook or Tweet it to help your friends and family. Feel free to send me an email (mrmoneybanks<at>multimillionaireroad<dot>com), find me on twitter @millionairer0ad or comment. Whether good or bad, I want to hear from you all.
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