Ability to Pay

'Ability to pay’ is the first point in our ABCs of financial planning for a flat purchase. It is important to work out how much would be a comfortable monthly mortgage loan instalment, which you have to pay over a period of up to 25 years.

To get a clearer picture, you can track how much you earn and spend in a month to work out your housing budget. If the cash outlay and the monthly housing loan instalments are too much of a financial burden, it may be better to give yourself more time to build up your finances before committing to a flat purchase.

To work out a realistic budget, consider the following:

Your income

Your income may be affected by events and changes such as:

• Job changes, becoming the sole breadwinner, etc.
• Income fluctuations if your income is based on sales commissions or variable sources

It is also prudent to set aside part of your income for any contingencies.

Your expenses

Besides basic expenses on food and transport, there are other expenses to consider when working out your budget. These include:

• Your wedding expenses, renovation expenses, education and daily expenses for children and aged parents, etc.
• Monthly payments for credit card bills and other loans, etc.

Owning a home will also involve monthly expenses like:

• Monthly loan instalments
• Service and Conservancy Charges
• Utilities and services bills
• Property tax
• Other maintenance cost

Your savings

• Savings for future use like children's education and your retirement needs
• Savings for emergencies