Just because you can doesn't mean you should.

My husband and I recently bought a new home (not new, actually built in 1911, but new to us). Before we started our search we worked out the things the new property had to have and what areas we liked. Then we set our budget for the new house. And here’s where I look at things a little different. I don’t want to have a mortgage in 10 years, our goal is to have our own home owned outright. So we worked backwards, based on how much we can pay off in 10 years. This gave us a figure we were comfortable to borrow and we added to that our deposit to give a purchase price/bracket we could manage. It was surprising that the figure we came to was a lot less than we thought we would spend (and way less than the bank would let us borrow).

We started looking at homes in the area in the price range we’d set and it was pretty evident that we were going to have to renovate again in order to meet our budget. As we were looking at houses we came across agents from our area that we both knew. I specifically remember looking at one property that was listed in our price range on realestate.com but as we were looking around I heard the agent tell another couple the actual price. It was $150,000 above our budget. ( I HATE THAT when they purposely advertise a property at a lower price to get you to go look at it!) 

As we were leaving the agent caught up with us and asked us about the property etc. We told him it was over our budget. He looked at us and said, “Really this is over your budget, you two have successful businesses surely you can afford this?”. 

That is exactly the difference. According to the bank, yes we could borrow more and ‘afford’ it. But I couldn’t afford to pay that amount out over 10 years and be mortgage free at 52. It so important to look at what you want when borrowing for a car, house or anything else and stick to it.

After all, that agent isn’t the one paying my mortgage each month – I am!