If you're looking to obtain a first home buyer loan, a key question on your mind will likely be: How much should I borrow?

Given that buying a property could well be the single biggest financial decision in your life, it's important to do the groundwork before you launch into a property purchase.

Working out how much you should borrow depends on a range of factors, some of which are in your control and some of which aren't. 

The golden ratio

If you want to cut down extra expenses, you should definitely try to save up at least 20 per cent of your desired property's value. 

This well help you avoid Lenders Mortgage Insurance, which is an added cost for borrowers who have deposits less than 20 per cent.

While you can take out a home loan with a deposit of less than 20 per cent, this could cost you in the long run. 

What's your lifestyle?

It's essential to be realistic with your spending habits. While you might need to cut down on how much you spend in order to save a deposit for your first home, there is such a thing as being too ambitious.

Instead, focus on budgeting for every last thing, from bills and groceries to the odd meal out with friends. Having a little spare cash available for a dinner once in a while or relatives' birthday presents will help you stick to your savings goals. 

Knowing how much you can afford to spend will help you determine how much to borrow. Once you get into the swing of a good savings habit, you'll be much better placed to work out just how much to borrow.

Expect the unexpected

Circumstances do change and there's every chance your current financial situation will change a few years down the track.

When deciding how much to borrow, it's worth considering how you would cope if your income was reduced or you couldn't work for a while.

You can contact a Smartline Mortgage Adviser on 13 14 97 for home loan advice. Or complete our call request form and we'll call you!

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.