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I Want To Buy A House But How Much Can I Afford?


It is important to determine how much you are willing to spend on a home before you start looking. These are our top tips for finding the right budget to support your move.

It’s important to consider affordability when you are looking for a home. However, you might not know where to begin. You can determine what you can afford, how much monthly mortgage payments you can afford and whether or not you will be approved for a mortgage by looking at your finances.

Next, we’ll examine where your decisions could affect what you pay and other costs that you may have overlooked.

If you are a first-time buyer

It will all come down to these main points when you are considering purchasing your first home.

How big is your deposit?

A larger deposit will give you more options when you choose a property. A deposit of 10-15% is the norm, while 20% of the property’s value is ideal. Although some government schemes and mortgages allow for a 5% deposit, there are drawbacks. You can obtain a supplementary loan from the government through the Help to Buy Equity Loan Scheme. This is free of interest for five years and can only be used for new builds.

A mortgage lender that requires a 5% deposit may offer lower rates if the deposit is larger.

Are you a good investment?

You will need to be viewed by the bank or lender as a viable option for receiving a mortgage. They must know that you are likely to repay it.


– If you have significant debts it is worth paying them off first. If you have large amounts of debt, a lender won’t lend you a mortgage. Before you apply for a mortgage, make sure you have paid off all outstanding debts.

Credit Score

– It’s simple to check your credit score and see how a lender views you. Clearscore, an app that can help you improve your credit score, will identify any problems and provide tips. A higher credit score will increase your chances of getting a great deal on a mortgage.

Owning on Finance

– If you own a lot of finance items, such as a sofa or car, it can be viewed the same way that a debt. Before you approach a lender to get a mortgage, it is worth paying off as many items as possible.

What can you afford each month?

This is not a matter of just looking at your deposit and applying for a mortgage. When reviewing your application, mortgage underwriters will also consider the following:

The x 4.5 rule

: Lenders will typically only lend 4.5 times your income annually to avoid overextending themselves. You can combine your incomes to get a larger mortgage, so you may be able obtain a better mortgage.

Your monthly spending habits.

If you are always in the red at the end of each month or if all your money is spent on dining out, bars, and nightclubs, the lender may consider you a risky borrower. Although they don’t look at all your bank statements every month, they will often check them a few months in the past. Make sure you have your accounts in order.

Monthly mortgage payment

– Previously, mortgage payments were much cheaper than rent. A mortgage calculator can help you estimate how much your monthly mortgage payment will be. The length of the mortgage term also has an impact. A 30 year mortgage rather than a 20-year mortgage will reduce your monthly payments but you’ll be paying more interest over a longer period.

You could end up in debt if your mortgage payment is excessive. The underwriters will review your bank statements. You should ensure that the mortgage you have been approved for has a monthly payment that is manageable and doesn’t put your finances under pressure.

How to determine the price of property that you should buy as a first-time buyer

If you have a deposit and don’t owe any debts, you are ready to look at properties.

You can earn PS25,000 per year if you and your partner make PS19,000 each year. This gives you a combined annual income totaling PS44,000. Multiply this figure by 4.5 to get a PS198,000.

Add whatever amount you have saved to this and you will get the maximum price range for properties. If you have a deposit of PS20,000, you can look at properties that are priced around PS218,000.

If you are looking for properties that fit your budget and have a low price range, you may decide to increase your deposit.

If you have a house to sell

You will need to consider your income and how much equity your home has before you decide what price you can afford to sell your current home. You will be able to use more of the money you have if you have a substantial amount left on your mortgage.

If your home is valued at PS250,000 and your mortgage debt is PS55,000, the equity can be used to increase or replace your deposit. The mortgage lender will receive the remainder of the proceeds.

These same rules apply to the 4.5 rule, which is based on your income. However, if you already have a mortgage you might be in a better position with more competitive mortgage rates.

Keep in mind that your asking price may change depending on the market. You should determine the lowest price you are able to afford for your property. Don’t accept any offer below that. Remember that an estate agent will receive a percentage of the sale price.

Where are your purchases?

You might have a particular area in mind that will impact your budget. Take a look at the budget that you have calculated using the questions above to see if it matches the type of property you are looking for in this area.

There are compromises that must be made if it does not. You have two options: you can make changes to your chosen location or property type, or you can wait and buy. This will allow you to grow your deposit or increase your income so you have more options.

Compromise on location

You can increase the radius of your search or move farther away from areas that may raise the price if the area you are looking for is not within your budget. Although properties close to public transport are more expensive, if you don’t require it, then you can choose further away and pay less.

Even if you are only 10 minutes away, a wider search may result in a significant price difference.

You may also find that a different area is better because it offers similar amenities, schools, and other opportunities.

Compromise on type of property

You can choose the property that suits your needs if you’re clear about where you want to live, whether it be for work or personal reasons. A flat is usually more affordable than a house, and leasehold is generally cheaper than freehold. However, be aware of ground rents as well as other costs.

You can choose a property that needs more work, but again, you should price the work up and get a survey done on the property. Or, you could choose one that has no particular benefits. Properties without parking or gardens are often cheaper. If this is not an important consideration, then make the most of it.

A house you like could be enlarged into the backyard, which will allow for more room for a larger kitchen or additional living space.

Other expenses you might forget

You don’t just have to pay your mortgage payment and your deposit. There are many costs involved in buying a house.

You will still have to pay for conveyancing, survey fees, estate agent fees (if your property is being sold), a mortgage arrangement fee, stamp duty (unless you are a first-time buyer – there may be exceptions).

Use our Moving Cost Calculator for an estimate of what you will need to pay ahead of time.


There are many things to consider when determining your budget. However, the 4.5 rule will be the most important. This will help you decide if you have enough money, how much you deposit and what you want.

You can find the perfect home by researching on property portals and being realistic about your budget.

Don’t forget about to negotiate! It’s possible to get more for your money that you think.

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