Is the amount I'm borrowing manageable?

House keys

With interest rates now being as low as they have been in years, there are a huge number of people deciding to take advantage and purchase their first or next homes. Many are even deciding to dip their toes into property investment as a way of building wealth.

However, such a glut of financing can lead to a mortgage hangover. Before you rush into a home loan, are you sure you are keeping your loan expectations realistic and manageable?

Expecting the unexpected

Most people, being sensible, make sure they work out how much they need and their ability to service the mortgage before committing to a mortgage. Speaking to a mortgage adviser is a great place to start. What many people fail to do is expect the unexpected: What if your financial circumstances take a turn for the worse? What if your weekly income suddenly disappears?

Take accident and injury, for example. From 2014 to 2015, the ACC recorded over 1.8 million claims for injuries, resulting in an expenditure of $1.19 billion on compensation for those who were unable to work. A further $514 million was spent on care and support, and $771 million on hospital treatment and surgery: that's a lot of Kiwis out of work, potentially permanently. All that time out of work, if you are able to return at all, could swiftly put you and your family on the wrong side of your mortgage as your income suddenly drops well short of your mortgage plans.

Knowing the costs

However, it isn't just the unexpected costs that can result in financial hardship. Children, new pets, an ill family member, taking on a new job that is further away, all of this can put a dent in your finances. People often underestimate how much these issues can cost, particularly over the long term.

The key to combating this is planning ahead. Insurance is a great idea, particularly income protection. But having the right kind of mortgage and lender is just as much of a priority. With the right mortgage advice, it's perfectly possible to ride out these bumps in your repayments and still maintain a comfortable lifestyle. 

Want to know more? Check out our infographic below for some hard statistics, or get in touch with one of the team members at Squirrel to take true control over your home loan. 

Infographic - manageable borrowing