Don’t Risk Losing Your House: Calculating What You Can Borrow

Don’t Risk Losing Your House: Calculating What You Can Borrow
October 4, 2013 Comments Off on Don’t Risk Losing Your House: Calculating What You Can Borrow General Pandora Kornfeld

How Much Can You Afford To Borrow?

Some experts say that your mortgage payment can be up to a quarter of your monthly income. That truism really depends upon how much you make and therefore a mortgage repayment calculator is a useful tool.  If you income is modest, the other 75% of your income might not really be enough to cover the other expenses of home ownership and other bills.

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Calculate Monthly Mortgage Payments

You can find a variety of free online mortgage payment calculators that will help you estimate your monthly payment. If you have already talked to a mortgage broker, you may already know your expected interest rate. Otherwise, you can look online to find typical interest rates for new home purchases. They fluctuate often, and your own rate will depend upon your credit and the amount you want to borrow.

Don’t Forget About Property Taxes And Homeowner’s Insurance

You will also need to add in property taxes and homeowner’s insurance. You can choose to pay these along with your mortgage, or you can pay them separately. If you are sure you will have the cash, it might be convenient to simply pay them yourself. If you are worried about your budget, it might be better to have them included in your monthly mortgage payment. Keep in mind that these extra bills will increase your monthly payment substantially.

Estimating Monthly Mortgage Payments Based Upon Price

It is impossible to accurately predict your mortgage payment until you have actually been offered a loan. However, a good rule of thumb is usually about one percent of the sales price. You might expect to pay about £1,000 a month for a £100,000 home. Keep in mind that this is only a rough estimate.

Calculate The Other Costs Of Home Ownership

If you are used to renting an apartment, you might not be used to paying for repairs and general maintenance. A new home might be covered by a warranty, and you can also choose to purchase a warranty for an older home. This can help you control your out-of-pocket costs, but it will not eliminate them. Be sure to budget for maintenance and repairs too.

How Much Can You Afford To Borrow?

If people learned anything from the recent rash of foreclosures, it is that it is a good idea to borrow conservatively. It is hard to predict what will happen next year, and it might not always be possible to sell your home quickly if you lose your job or have other urgent financial issues. Buy the best house you can afford, but be sure that you can really afford it.

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