A crucial step in finding the right home is to first determine how much you can afford to spend on your new home.
In most instances you will need to save up a cash amount for the down payment, the transfer duty and transfer costs.
Your Monthly Mortgage Bond Repayment
You should calculate a monthly repayment that you feel comfortable with.
To calculate how much the bank will be willing to lend you, they will use a housing-expense ratio of 30%. This means that 30% of your monthly income can be spent on mortgage payments, including property taxes and insurance.
To do this calculation yourself, take your gross income (before taxes and deductions) each year and divide by 12 to determine a monthly income. Multiply the monthly income by 30% (x 0.30) to calculate an estimated monthly mortgage payment.
You can calculate a monthly repayment using the monthly mortgage bond repayment calculator.
Maximum Home Loan Amount
Once you know how much you can afford to repay on a bond every month, you can calculate your maximum home loan amount.
Simply divide the monthly bond repayment by the bond repayment factor, and then multiply by 1000 (payment / f x 1000).
The calculation is not too difficult to do yourself, but here is an easy-to-use maximum bond amount calculator for your convenience.
House Price Range
When you know how much you can borrow towards your new home, simply add it to the cash amount you have saved towards a deposit.
This is your house price limit.
