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Affordability
Our example illustrates the annual costs associated with buying your own home.
Annual Costs
Annual costs comprise interest, repayments and ancillary costs. When added together, they should not exceed 1/3 of the gross income. Our clients, Mr. and Mrs. Bieler, both aged 34, are planning to buy their own home. Let's look at the affordability:
Sample Calculation, Assuming 20% Capital Deposit in Cash
Financing |
|
|
|
Purchase price/market value |
650,000 |
100% |
|
Capital deposit (in cash) |
130,000 |
20% |
|
1st mortgage |
429,000 |
66% |
|
2nd mortgage |
91,000 |
14% |
Interest Costs* |
|
|
|
1st mortgage at 5% |
21,450 |
|
|
2nd mortage at 5% |
4,550 |
|
|
Annual repayment installment |
4,550 |
|
|
Annual ancillary costs p.a. |
6,500 |
|
|
Total cost per year |
37,050 |
|
|
Total cost per month |
3,088 |
|
* imputed (to guarantee affordability even if interest rates are rising, average long-term values are used as the basis for calculation)
Use the mortgage calculator to work out your own personal financing model. If you wish to obtain further advice, please contact your client advisor or call 0844 855 400.
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