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Will I be able to afford the loan?
Loan affordability is a very individual thing but the following are some tips to determine if you can maintain your loan repayments and still live comfortably.

Renters
The amount that you currently pay in rent will contribute towards your new loan repayments however there are other expenses that home owners incur that renters don't like Council Rates or Body Corporate Strata Levies. These need to be considered.

Savers
If you have been able to save a good percentage of your income on a regular basis, this savings regime will change as you will need to now meet a loan repayment which will leave you less surplus income to save. In fact you will probably require your savings to put towards your purchase deposit.

Spenders
If you save little and generally spend up to the amount of your income, you could struggle with taking on a hefty home loan repayment. You will not only need to curb your spending but you will need to budget for upcoming expenses including those relating to home ownership. Budgeting and cash flow management skills can be learnt by using a web application like Lifestyle Planner (a sister company of BrokerSource) to keep you on track.

Put Simply
Most lenders use an average rule of thumb to determine loan affordability. On average, your monthly home loan repayments should not exceed 40% of your Gross Monthly income using an "Affordability" or "Assessment" rate (not the actual interest rate) to calculate an affordable repayment amount. This is to ensure that you can maintain your lifestyle and still afford the loan repayments should interest rates rise.

A $250,000 loan at an Affordability rate of 8.00% p.a. would have a monthly repayment over a 30 year term of $1,834.41 meaning you would have to earn $4,600.00 gross per month (or $55,200.00 per annum) to qualify.

If the actual interest rate was 5.70% p.a. on this loan, your actual loan repayments would be only $1,451.00 per month or $334.62 per week (which could be cheaper than renting).

Your Mortgage Broker can assist you calculate loan affordability for your particular circumstances.