Getting ready for a mortgage - prepare your spending habits
Part of the process of buying a home is getting your finances into order. This is especially important for newbies who are entering the property market for the first time and taking out their very first home loan.
Getting ready for a mortgage doesn't just mean finding the necessary documents to bring to your mortgage broker, it also involves adjusting your mentality before obtaining your loan.
While we are debt-free, many of us can be a little wilder with our money. Holidays, shopping and splurges can all be a bit tempting while we have the financial freedom to do so.
For instance, when you see a great sale on at the mall, do you whip out your cash like your wallet is on fire?
Or perhaps you might have multiple credit cards stowed away for those sneaky online purchases each month?
It's important to maintain some luxuries and treat yourself every now and again, but you will need to create a schedule to stick to so you can keep track of where your money is going.
So to be sure that you are comfortable with making regular payments towards your home loan, you may want to think about preparing your spending habits so that you are ready to take on your mortgage with confidence.
Want versus need
You might think that you absolutely need a brand new LCD television to complement your lounge decor, but this sounds more like a 'want' than a 'need'.
To prepare your spending habits, collect some of your receipts for a couple of weeks to identify where exactly your money is disappearing to. Then you can work out which items you buy on a regular basis are a want or a need, and eliminate anything you see as an unnecessary expense.
Create a budget
After you've gone through your spending with a fine-toothed comb, you can prepare yourself a budget.
A helpful tool to use is a loan repayment calculator, which can give you a good idea of how much you'll need to contribute to your mortgage each month. This will then give you a figure to stick to so you can continue meeting your payments.
It's crucial to note that budgets are only effective if you stick to them. It's tempting to stray away from it for the odd purchase, however, this can reduce how much income you have to spend on more important items.
Set yourself a fixed amount to spend on luxuries each week so that you have breathing room just in case any other expenses crop up.