It is always wise to follow the sentence – Live within your means. You must have heard about people who buy big cars but end up having no money for gasoline. The same applies to your mortgage. Take out a mortgage that you can afford to repay. There are many individuals who hunt for answers to their question “How much mortgage can I afford
?” Getting an accurate answer to this question can determine how well you manage your mortgage. People who settle for a house and then work out their finances end up falling behind on payments or losing their homes in foreclosure. Your finance plays a vital role when you take out a mortgage.
The size of the mortgage you can take out or the mortgage you can afford depends on number of factors. It also involves a bit of calculation and there are few parameters that you have to take into consideration before you find an answer to “How much mortgage can I afford”?
What are the factors that influence your mortgage payments?
The following factors will determine how much you are required to pay each month –
Mortgage term decides how much you are supposed to pay every month depending on the loan term you choose. If you choose a 15-year term, you will have to pay more each month as compared to a 30-year loan term when you have to pay less per month but your mortgage will attract a higher interest rate.
Is fixed-rate mortgage better than adjustable-rate mortgage? Often borrowers are confused about the interest rate they should opt for. FRM will help you to plan out your payments well in advance. This is because it keeps your mortgage payments fixed throughout the term of the loan. ARM will prove to be beneficial as long as the rates are low in the market.
Your income will determine how much mortgage you can afford.
The amount you earn, your financial obligations will decide how much you can borrow so that you are able to pay back without straining your wallet.
The higher the principal amount, greater is the mortgage outstanding balance that you need to repay.
