We pay approximately 40% of our net income (inc rental income) for our 2 mortgages.
When you are first starting out - I wouldn't go higher than 30% and ensure that you do not borrow more that 80% of the property value.
ETA: Annnnd I thought I would copy and past my other post because it has some good tips:
We bought our first house 5 years ago tomorrow for $258,000 with a loan of $206,400 and the required repayments were around $1400, but we used to put in as much as possible.
In June last year, we refinanced that loan so we now have 2 houses with a combined value of $785,500 and a combined loan of $628,400. Our repayments are about $3700 per month after the recent rate rise, but we get about $1500 in rent.
- Only borrow 80% of the purchase price if possible. This will not only save you about $6,000 in mortgage insuranrce, it will also mean that at the very least you have 20% equity in your property, so, should the sh!t hit the fan and you have to sell, you will still be able to pay out your loan and agents fees. So for a $300,000 property you will need to have saved a $60,000 deposit (20%). It will also enable you build equity in you home quicker, meaning you can get investment properties (but I won't go into that!)
- Speak to a mortgage broker (like Aussie etc.) you don't have to pay them a cent and they do all the work for you They will also be able to tell you how much you can borrow. But NEVER borrow as much as they tell you - just because you CAN, doesn't mean you SHOULD!
- Get a loan that has a free re-draw facility with no minimum amount - then put as much money as you can into the loan!! Treat it as a savings account. You'll be offsetting the interest on your loan (approx 6.5%) rather than earning a misely interest of about 4% that the Government take their tax out off too!
- Pay off extra! On a loan of $240,000 (for a $300,000 home) at 6.5% with a 30 year term, if you pay just $100 per month extra (which is just $25 a week, or a large cuppa each workday).... You will save: 4 years and 10 months of the loan and a whopping $58,352.47!
- Pay weekly! Or at least fortnightly. With the loan same as above, paying monthly, over the life of the loan you will pay $318,861 just in interest. Without any extra payments if you change your payments to fortnightly the interest goes down to $245,734 and if you pay weekly, $245,579. This is a saving of $73,282 without any extra payments!!!!
Ok, I stop going on now... I get a bit excited....
Last edited by Allicat9
on Wed Jan 12, 2011 2:10 pm, edited 1 time in total.