Clear Signs You Can Actually Afford A Bigger House Than You Think
If you love decorating your interiors lavishly, you probably dream of living in a bigger property. When you have more floor space, you automatically have more options to create visually impressive rooms.
For many people, it’s only natural to dream about owning a larger property. When people sell their businesses or win the lottery, they often move out of their existing homes and buy a large mansion that fulfills all their needs.
Being able to entertain is the allure of a larger property. When you have more space, you can host bigger and better parties. Plus, when you upgrade your home, you can add features, like swimming pools, which come in handy when you want people to come over.
Of course, you’d like all this stuff, but whether you can afford it is an entirely different matter. The majority of people assume immediately that owning a mansion is out of the question, and it isn’t something that they can do on their modest incomes. But when they investigate their finances more thoroughly, they soon realize that that’s not always the case.
In this post, we’re going to look at some of the signs you can actually afford that big house you want. Remember, always look for the best mortgage rates.
Your Monthly Expenses Are Low
If you and your partner both have professional jobs and earn regular, reliable paychecks, you might have noticed something: you often have spare cash leftover at the end of the month. For many couples, the remainder is small – maybe a couple of hundred dollars a month. But for others, it is much more substantial, sometimes running above $1,000, accumulating in a savings account every month.
To make sure that you’re not seeing some sort of weird financial artifact, run through your budget in detail. Often couples can wind up accumulating more money than they spend when they get promotions but keep their lifestyle the same. Take a look at any extra payments you’re now getting and compare it to your average expenses over several months. If you notice a consistent gap between the two, it could be a sign you’re ready to upgrade your home and life.
Your Credit Is Good
If you follow sound financial advice and always spend less than you earn, your credit score will slowly improve. After about ten years into your career, it’ll be so good that you’re able to get the best interest rates when you apply for a mortgage.
FICO rates credit scores above 740 as “very good” and anything over 800 as “excellent.” If you don’t know what your score looks like, you can now request to view it only using various tools. These days, checking your score doesn’t actually affect it, so you don’t need to worry about this.
Your Emergency Funds Are Plentiful
The coronavirus pandemic underscored the importance of emergency funds. Everyone needs a stash of cash they can draw on when the economy goes into freefall, as it did this spring.
If you have a lot of money sitting in savings accounts, it could be a sign that you’re ready to take the next step up the housing ladder. These days, most mortgage providers want 20 percent down on a property. FHA loans will usually accept much less than this. If your emergency funds are topped up, and you have enough money to see you through the next six months, you’re in an excellent position to plow extra savings into your deposit. Usually, you have enough for a new house deposit, using equity released from the sale of your old one.
Check the amount of cash in your emergency savings. If you can cover six months of regular expenses and the cost of moving, you’re probably in a financial position to upgrade to a bigger house.
You Have A Low Debt-To-Income Ratio
Except for mortgages, most debt is a drag on your wealth and something that actively gets in the way of acquiring the property that you want. The less money you owe to creditors, the lower your monthly interest expenses, and the more likely you are to be accepted for a bigger mortgage.
Mortgage broker Altrua Financial points out that most buyers can access lower rates if they scour the market for products that suit their needs. Often, the lowest rates are available for people who have the best debt-to-income ratios. Most people with debt-to-income ratios below 43 per cent can get access to mortgages. Those closer to the upper threshold will have to pay more.
You Are On Track With Your Savings Goals
According to figures, the average person saves around 7.5 percent of their pre-tax income per year. Financial experts suggest that most people aim higher than that if they can, as this will compound well into the future.
The ideal savings rate is around 15 percent, but that can be hard to achieve. Financial advisors suggest that people take it “one percent at a time.” If, for instance, you currently save five percent of your income, you could try increasing this to six, then seven, then eight, and so on. Once you get into the habit of saving more vigorously, you ultimately build momentum, adding to your savings far more rapidly than you ever thought possible.
If your savings goals are on track, then it could be a sign that you’re ready to splash out a bit more on your accommodation. People with savings rates north of 20 percent should think about whether their current living arrangements are serving them well. A savings rate of this magnitude usually implies plenty of extra room for expenses. You may be living too far beneath your means.
Would you like to live in a house with more floor space and beautiful features? If so, it could be in reach. You don’t have to be a millionaire to own a large property. Even people of modest means can adjust their budgets to prioritize their homes over other expenses in their lives.