Setting your budget

There are two key calculations to make when you’re thinking about buying a new home:

1. what you can afford to pay – an upper limit that cannot be exceeded
   
2. what you are prepared to pay – always less than you can afford and possible to shift if want an extra feature in your home

Most banks and mortgage companies provide access to free online calculators that can help you work out what you could be eligible to borrow and calculate your repayments.

While the lender will calculate a maximum loan amount, you should consider what you can realistically afford based on your:

• current income 
• financial obligations 
• credit history 
• current savings 
• living expenses

It’s important to consider your circumstances can change and interest rates fluctuate, so many advisors recommended you allocate around one third of your gross income to mortgage repayments.

One-off and other regular costs associated with your mortgage should also be considered. These could include:

	lender’s fees for loan applications, valuations, account establishment and financial transfers, plus any ongoing account-keeping fees
	mortgage insurance when your deposit is less than 20% of the property cost
	State Government stamp duty paid to transfer the property to you
	GST on new homes
	conveyancing fees, which are legal costs for transferring the property to you
	settlement agent fees for tasks undertaken in transfering the land, such as resolving special conditions or determining rates to be paid
	property inspection costs if you arrange a formal inspection of a property, which might involve termite checks, soil tests or a land survey review

On the positive side of the balance sheet, you could also be eligible for special homeowner grants and financial incentives!