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The Rent vs Buy Decision
You know how people say that rent money is dead money? Well, the reverse may also be true. Financial experts say renting may not be the evil many of us think it is. If you rent and invest wisely, you may accumulate wealth faster than by going heavily into debt.
That's because money used in paying interest over the long term on a large debt may often be greater than rent payments. When weighing up the rent vs buy argument, consider the total cost of borrowing and the likely return on any investment.
How Much Can You Borrow?
As a basic rule, lenders will let you borrow an amount so your monthly payments don't exceed 30% of your pre-tax income.
The Traps of Borrowing
Home loan deals that appear attractive can land you in deep water if you're not cautious. Consider whether you can comfortably service the debt and take into account any likely change in your financial or family circumstance. While the financial institution will examine your capacity to repay the loan, no one is in a better position to know what you can really afford than you are.
As a general rule first-home buyers should try to limit their borrowings to 80% of the value of the home.
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