With proper preparation, you can purchase property without the worry and deprivation that comes from being financially stretched beyond your means.
Mortgage Calculators
There are many real estate and finance companies that offer free mortgage calculators on their web sites. Type “mortgage calculator” into a search engine and you should find plenty. If you have an idea of the price of the type of property you would like to buy, use that figure. Otherwise, use your search engine again and find a real estate company in the area you are interested in and you will be able to find average prices for that area.
The mortgage calculator will show you what your monthly payments will be at the going interest rate. If you have a larger down payment and excellent credit you can negotiate for a lower rate, but the mortgage calculator will provide you with a rough estimate. How does this figure fit into your monthly budget? Besides your down payment, you will also need to deduct cash for closing costs from your savings. If the monthly payment is too high, there are steps you can take to reduce the payment and qualify for a lower interest rate.
Want to know how much you’ll have to pay in stamp duty? Head on over to StampDutyCalculator.com.au to find out.
Debt Management
Paying off high interest bearing credit cards should be your first step. Start with the smallest balances first and when one is paid, apply the payment you were making on that account towards your other outstanding debt. When the balances are gone, close all the accounts except the one with the lowest interest rate. Use this card for emergencies only. Place the credit card in a container of water and store it in your freezer to prevent the frivolous use of it. Waiting for the ice to melt gives you time to reconsider whether the purchase is necessary. Alternatively, you could use a balance transfer offer to consolidate your credit card debts onto one single card with a lower interest rate. You can find many of the best offers in Australia on CreditCardCompare.com.au.
Make an appointment with your bank or finance company to discuss a debt consolidation loan. You can often negotiate a lower interest rate and payment than you are paying with all the individual loans. While a lower payment will reduce your monthly expenses, applying the extra funds towards paying off the loan will reduce your overall debt load. Reducing your debt not only makes a mortgage more affordable, it often provides a lower interest rate.
While you will want to ensure that you carry enough life insurance to cover your new mortgage, consider taking out a loan against your existing policy or retirement account to pay off your debt. Go to RateDetective.com.au to find a policy.
Refrain making any large purchases with credit. Now is not the time to finance a new car.
Saving for the Deposit
The fastest way to accumulate more cash is to cut unnecessary expenses. Here area some easy ways to achieve this:
- Stop buying books and magazines and use the library.
- Carefully plan a menu and shopping list and do not deviate from it in the store.
- Pack your lunch instead of eating out.
- Carry only enough cash with you to cover planned purchases.
- Evaluate your pay TV, internet, and phone expenses. Can you save money by bundling all services with one provider?
- Many more money saving ideas are available here.
With a few minor adjustments, you can reshape your finances and enter into property negotiations with confidence.