Buying a house is one of the most pivotal milestones in life. This achievement brings in different levels of comfort, not worrying about scrubbing scuffs on walls when the lease ends or getting kicked out if you miss the rent payment by a few minutes. Owning a home also gives us a sense of security. It allows us to feel safe in our own space, and we’re free to do as we please, like having a dog or owning a big fish tank.
Before you own a house though, taking out a home loan is the first step. Aside from the many documents and credit history to prepare, you also might want to assess if you’re truly mentally and emotionally ready to take out a home loan. Just because our best mate got a home loan yesterday, doesn’t mean we’re in the same capacity to do so.
Here’s how you can tell if you’re home loan ready:
Have proper finance management skills
Getting a home loan is a big responsibility. To be ready for a home loan, we’ll need to have proper finance management skills so we can stay on top of the different expenses related to owning a home as well as avoiding late repayment fees. These skills include budgeting, proper tracking of funds, as well as financial self-control. Relying heavily on Afterpays and UberEats may also cost you your home loan. If you want to stay on top of finances, then check out how Frollo can help you here.
Can afford to borrow
Taking out a home loan entails a long-term commitment. So when thinking about borrowing, we’ll need to consider how much we could borrow today as well as how much we could borrow in the future. If paying credit cards is a current problem, then taking out a home loan may only cause us to dig ourselves deeper into debt.
We also need to think about the stability of our source of income. If employed, how stable is the job? Will the company downsize eventually or does the possibility of getting a promotion exist? If self-employed, how stable is the business? Is the business giving you more than enough income to live on? Ensuring that the source of income is stable will help you know if you’re truly ready for a home loan. If imminent threats to how we earn income exist, then reconsider getting a home loan when things are more stable.
Have enough savings for a deposit
Aside from income stability, we also need to think about how much we’ve saved for a deposit. The general rule of thumb is to have 20% of the total property price. This means, if we’re taking out a $300,000 loan, then we’ll need at least $60,000 saved for the deposit. Without these savings, the chances of being approved for a home loan may be slimmer.
Can afford repayments
Finally, we’ll also have to consider the affordability of home loan repayments. If monthly repayments will feel like a burden, then you might want to consider holding off on the home loan for now. If we’re able to make home loan repayments with ease, then we’re definitely ready to take out a home loan.
Be Home Loan Ready
Frollo’s Home Loan Ready app lets you see if you’re ready to take this next step. All you need to do is key in your desired home loan amount, the interest rate, the weekly repayment, and your current rent. The total of the current rent and additional repayment amount will act as your weekly home loan repayment. Every time you put these aside in your bank account, you’ll see yourself progress to becoming fully Home Loan Ready. Learn more about Home Loan Ready here.
Your dream home may be closer than you think. So go and take the Home Loan Ready challenge today! Download Home Loan Ready here.
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