How To Calculate The Monthly Mortgage You Can Afford For A Santa Barbara CDO Home

Mortgage is a kind of loan in which a property, such as a Santa Barbara CDO home, acts as a collateral until the debtor fully pays his debt. In case a debtor loses the capacity to pay off his debt, the creditor will take the property which serves as a collateral as per agreement between both parties. In order to avoid this kind of risky circumstance, it is important that you take your capacity to pay into consideration before engaging yourself into a mortgage contract.

When applying for a mortgage, the first thing you should do is to determine how much you can afford to pay in a month without putting all your other necessities in life at stake. There are only two simple things you need to put in mind in order for you to have a safe and worry-free mortgage engagement for a Santa Barbara CDO property.

1. Determining the Net Income

It is important that you know exactly how much you get per month in terms of net income. Net income means gross salary plus all other allowances minus all salary deductions like taxes, mandatory benefits (SSS, PhilHealth, Pag-ibig), late, under time, and the like. For a clearer understanding of the calculation of the net income, below is the simple equation. You may as well ask for a pay slip from your employer to confirm the details of your monthly salary.

NET INCOME = (GROSS SALARY + ALLOWANCES) – (TAX + MANDATORY BENEFITS + OTHER DEDUCTIONS)

2. The One-Third Rule

The amount that you should set aside for the payment of your debts (this includes credit card balances, mortgage, and other loans) must not be greater than one-third of your net income. For example, your monthly net income is Php40,000.00. If you will follow the one-third rule for your debts, then the maximum amount you must spend in paying your debts should only be approximately Php13,000.00 per month. Remember, this is the maximum amount that you are allowed to spend. Spending more than this amount would only put your collateral in Santa Barbara CDO at risk, so you need to be careful.

By just simply following these two simple rules, you will now be able to determine the monthly mortgage that is affordable for you and with lesser risk of not being able to pay off your debts.