It is everyone’s dream to own a home. Nevertheless, the question that normally comes to mind of anyone who desires to be a homeowner is if they can afford their dream home. This is because buying a house can cost an arm and a leg.
If you are pondering the same question, this post will address your doubts and serve as a checklist to see if you can afford your dream home. Read on to find out.
1. Interest Rate
If you are making a monthly mortgage payment, it would do you good to weigh interest rates before applying for a loan
. Mortgage rate interest payments fluctuate, and the higher the interest rate, the higher the mortgage payment you will make during the year the interest rate climbs high.
Therefore, the lower the interest rate, the better.
There are times when the mortgages interest rate will be on a decline. You might want to wait to purchase a home until interest rates are lower.
2. Monthly Financial Commitment
If you are going for a mortgage loan
to buy your dream house, you will want to be sure that you can comfortably afford the mortgage payment. In calculating how much you can afford, there are a few metrics you need to have at the back of your mind.
They include household income and monthly financial commitment (such as the hire purchase loan, student loan, etc.).
Make sure that you have three months' payment in reserve, as this will cover your mortgage payment in case of an unforeseen event.
3. Down Payment
In Malaysia, the minimum down payment to purchase a property is 10% of the sales price. Moreover, private mortgage insurance costs
between 0.3% and 1.2% of the balance of your loan.
You are ready to own a house if you can afford the down payment without having to take money from your emergency funds. This is because exhausting your emergency funds in buying a house leaves you with a limited cushion to fall back on during contingencies.
4. The Type of House and Location
Are you looking for a large house with spacious rooms? Big houses are known to be expensive than smaller ones. The location of the house also plays a role in determining its price and if you can afford it.
This is an important factor to consider before deciding on the type of house to purchase.
Moreover, the price of the house determines the interest rate you will be charged on a mortgage payment.
5. How Long You Plan on Living in the House
Determining how long you plan on living in the house is another important factor to consider. Generally, you would not want to purchase an expensive house if you plan to move out soon.
In fact, financial experts recommend living in a house for at least five years before selling them. If you do not intend to stay put for long in the house, you should probably consider the less expensive options so that you can sell it out quickly in the near future.
The Bottom Line
We hope this post can help you make a wise decision
when you purchase your dream home. Making the wrong decision often causes the buyer a bomb. Moreover, it’s equally important to take some time to explore all the available options before making a decision.