How much do you really want to pay for that property?

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Many often ask this question when they’re finally looking at the price tag of a property in front of them. For people with a bag of cold hard cash it’s fairly straight forward. But it is a very subjective question and if you love it most likely whatever the price you will pay it or near it, and that’s fine. But this bypasses crucial steps that can get you in trouble with something you cannot afford. The question of how much you do you really want to pay for a property should have been answered long before your visit.

So how do you do that? Well, turns out that’s not so hard.

  1. Find out how much you and whomever you are buying a property with, whether your partner or other family members, get paid each month after taxes and deductibles are accounted for. This is your household income.
  2. List down the expenses you have each month at the moment, such as car loans, electricity bills, phone bills, your Internet plan etc.
  3. List down the expenses you expect to pay when you do eventually own a property. This includes association or condominium dues, maintenance and upkeep costs, any insurance that you purchase to cover the property etc. Estimating the cost of something you don’t yet own may be hard but an experienced property specialist such as Jobelle can help you with that once we understand your needs.
  4. Figure out what costs aren’t necessary or will go away once you have purchased the property. Doing things such as eating out regularly, or going out on a weekly basis can really shrink your budget more than you realize, trying to minimize unnecessary activities has a real and exponential benefit on your ability to afford a property later. Also factor in the cost of transport and/or gas. The closer you move to your work the less you need to budget for it.
  5. Subtract your remaining expenses from your monthly household income. Don’t forget to factor in an “emergency fund” or a savings component so you have some flexibility, whether that’s to cover an unexpected expense, or to save for a life goal. The amount remaining will be what you are able to spend each month.
  6. Finally, figure out your total budget by using a loan calculator. Your everyday bank’s website probably has one. Try to figure out a range using your monthly budget based on a 5, 10, 20 or even 30 year loan. Keep in mind that most banks ask you to commit to a payment schedule that is fixed, you cannot pay earlier to minimize interest repayments. Be realistic with the length of the loan, you aren’t likely to live in a small studio unit for the next 30 years and if you are to rent it out, you probably want to be very sure the built quality and property management are world class. This is where we can help in planning your purchase.

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