If you’re looking to buy new property, you will need to properly budget how much you spend. Doing so will help prevent you from overspending and becoming house poor. Here, we discuss some tips you can follow to budget for buying new property.
Use the 28% rule
According to the 28% rule, your mortgage should be no more than 28% of your income before taxes. While this rule can be handy, it is not something you have to stick to. It’s more of a starting point that will give you a range of prices you can target. For instance, if you have student loans to pay off, you may want to target something that is below 28%. However, if you have no loans, you could go above 28% without much of a problem.
Think about other expenses
Property ownerships is expensive. Your mortgage will be a big part of your expenses, but there will be other factors, as well. Utilities, property taxes, and the like will all take a chunk out of your wallet. Make sure you can handle these expenses in addition to your mortgage before signing on the dotted line.
Build up an emergency fund
One of the risks of property ownership is that you never know what might happen. Everyone should already have an emergency fund, but property owners should have a larger emergency fund to fall back on. As such, make sure you have money saved away before you purchase new property.
Use an affordability calculator
If you’re still stumped as to how much money you should spend (or not spend) on your new property, you can use our affordability calculator. Simply put in your monthly gross income, debt expenses, the down payment you wish to make, and interest rate and you will see how much you can afford.
Gwyn Goodman can help you figure out your budget and find the perfect property for you and your family. Contact her today to get started.