Managing a mortgage

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Managing a mortgage


Keep your mortgage level reasonable

It’s easy to get carried away with the high house prices these days, but over-committing to a mortgage that you’ll struggle to service will only end in tears.

Keep your total mortgage to roughly 2.5 times your combined annual income. So if you and your partner earn $180K combined, look to borrow no more than $450K. This might sound conservative, but erring on the safe side now will mean you can still have a life outside of your paying down the home loan.

Based on current interest rates, your mortgage repayments at this level would be around $2,500 each month.

Save a 20% deposit

This is what our parents generation did, but with credit coming so easily to us now we tend to save very little before jumping into a home purchase.

Go back to basics and stockpile your cash madly, until you reach 20%.

Based on borrowing $450K, you’d want to save $113K and be looking to spend around $563K (inc. stamp duty) on your property.

Once mortgaged, keep saving

One of the most common mistakes we make is borrowing to our maximum capacity and then having no spare cash, or even other investments, to fall back on when times get tough.

If you stick to a reasonable level of borrowings, you should find you’ll be able to save additional funds because your repayments won’t be so high.

It’s important to have some regular cash savings set aside even though you have a mortgage. The best way to do this is to use a mortgage offset account to hold this money. That way your savings efforts are also reducing the interest being charged on your home loan.

Renovation time?

If you’re not able to save enough for renovations, or if the property you buy needs to be renovated right away, use the same rule of thumb (2.5 times annual income) when considering your total debt.

If you’ve had your place for awhile, and made some headway on paying down the mortgage, you may also be in a position where your income has increased. It’s still prudent to extend your mortgage only to a maximum of 2.5 your annual income.

If you’re planning to renovate immediately after purchase, discuss this with your financial adviser, mortgage broker, or banker when you first apply for finance. Include this in the application for finance for the total required amount.

Need some help managing your mortgage? To chat property with one of the WE team, book in a time for a Free Strategy Session.


Disclaimer: Information contained within this article is of a general nature. Do not be rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.