If you’ve made the decision to change from renting to buying your own home then congratulations! There are lots of benefits to owning your own home. Before you search for your perfect home it’s best to make sure you work out what you can afford.
If you’re renting in Cairns, it’s likely that you’re paying on average around $350 per week. When you’re an owner your expenses change, so don’t just use your rental payment to work out how much you can borrow.
What you should check first
Make sure your credit rating is in order — my earlier blog post gives you some good hints and tips on how to do this.
Sort your budget before house-hunting — not the other way around. There are extra costs when you are a home owner:
- Rates — Your expenses can change by around $50 per week as a property owner rather than tenant
- Insurance — you’ll now need to insure the building, not just your contents, adding around $30 per week
You also need to make sure you can make your payments if interest rates rise. A rate increase of 2% adds $80 per week to loan repayments on a $280,000 loan.
Your broker will work through your finances with you and help you to sort out exactly what you can afford to buy.
You can also ask yourself a simple question: “If my rent increased by $150 per week, could I still afford to live where I am now?”.
If you only have to tweak your lifestyle a little — perhaps to stop eating out quite as much - then you’re probably on the right track.
If you’d have to move to a cheaper rental to make the payments, then you may need to consider buying a home in a lower price range.
- Think about costs that you will have as an owner that you don’t have as a tenant
- Consider what you can afford now — and if interest rates go up
- Talk to your broker who will give you all the information and help you need to make the step to home ownership