3 SIMPLE WAYS TO FIT YOUR MORTGAGE IN YOUR BUDGET
Looking to buy a new home and start your journey towards adulthood, but scared of the unknown? Mortgages can be a complicated topic, but we are here to make it easier to understand! There are lots of things to consider before buying a new home, and mortgages is a big one. You definitely do not want to end up giving up your home because you fail to keep up with your mortgage payments!
To that effect, our focus today will be on the three most important steps to take to help you buy a home of your dream without busting your budget.
STEP 1: EVALUATE YOUR BUDGET IN DETAIL
Preparing a detailed budget should be the first on your list if you really intend to fit your mortgage comfortably into your budget. Evaluating your budget in detail requires you take into account your monthly income, expenses, and even forfeiting some avoidable luxuries.
- Your Monthly Income
- Ideally, your monthly income should tell you how much mortgage you can take out and what kind of home to go for. A rule of thumb states that you can afford a home priced two to three times your annual income. You should have that in mind while taking out a mortgage.
- Your Monthly Expenses
- What’s your monthly expenses like? Your budget should tally with your ongoing monthly bills – car/student loan, feeding, savings, date nights, vacations, etc.
If you’re on a budget and you use to spend notable amount of money on frivolities, you may want to cut them out, or at least reduce them as much as possible. This will help you save more money for higher priorities.
STEP 2: CALCULATE YOUR HOME OWNERSHIP COST
If you already own a home, and you don’t have a defined percentage of your income set aside for your home ownership cost, then you’re taking a big risk. As a matter of fact, you may be contributing to the collapse of the mortgage market in the United States.
Your mortgage should be one of your most important financial commitments, in addition to other major bill associated with home ownership.
In calculating your home ownership cost, you need to consider the following:
- Home insurance
- Utilities – water, trash, electricity, etc
- Repair and maintenance for both interior and exterior appliances
- General house maintenance – power washing the exteriors, applying weed killer and pest control, fertilizing the lawns, pruning the back of the trees, etc.
All these are some of the things you need to factor into your budget as a homeowner.
How much does it really cost to own a home?
The cost of owning a home varies to a great extent. You’ll have to answer some personal questions if to determine what it may cost you to own a home. For instance
- What is the age of your home?
- What is the condition of the home?
- How is the climate and weather of your home location?
Do not forget that unexpected expenses will definitely come up, so you need to make budget for that too. You can make use of a mortgage calculator to help you calculate the cost of owning a home.
STEP 3: DO NOT BE AFRAID TO MAKE ADJUSTMENTS
After evaluating your budget in detail and calculating your home ownership cost, you should have a quality plan on how to fit your mortgage into your budget. However, life happens and things may not go as planned.
Let’s assume the worst – things did not go as planned – will you just sit there and allow your problems to overwhelm you? You need to own up, make necessary adjustments to accommodate your plight to avoid losing your home. You can refinance your mortgage with the aim of lowering your monthly payment. If things go as planned, or even better than planned, you can go above your rent mortgage.
The point here is, feel free to make adjustments as required to enable you pay off your mortgage as soon as possible.
We know this is a lot to take in, but it is most definitely worth it. Maybe after this you are wondering whether you should rent or buy? WalletGyde is here to help with that and more. Also, if you are moving out on your own for the first time, it may be scary, but that is why WalletGyde is here. We want to help you with your finances and grow your wealth along with you.
Feel free to drop any questions you have down below about mortgages or buying a home!