The household balance sheet behind a property decision

Begin with cash that reaches the household

Gross salary is useful for some lending ratios, but bills are paid from after-tax cash. Add irregular income conservatively and list expenses that occur annually as well as monthly. Build a base budget from actual statements. Changes to commuting, childcare, parking or utilities can offset a lower advertised mortgage or rent.

Compare debt strategies on total cost

For each balance, record the rate, minimum payment, fees and whether the rate changes. Paying the highest rate first targets interest cost; paying the smallest balance first targets early account closures. Keep required payments on all debts in either illustration. If a proposed payment does not cover ongoing interest, the debt may not decline and a repayment date is not meaningful.

A lower payment can conceal a longer loan

Debt consolidation or vehicle financing can reduce monthly outflow by extending repayment. Compare the total interest, fees and date debt ends. If unsecured borrowing becomes secured against a home, identify the new collateral risk. A lease comparison also needs mileage limits, end-of-term charges and the assumed value of an owned vehicle, rather than just the two monthly instalments.

Look beyond net worth

Home equity is not the same as readily spendable cash. An improving net-worth estimate can sit beside an increasingly fragile monthly budget. Calculate the effect of a temporary income interruption without assuming that a credit line will remain available. If obligations are already unmanageable, seek appropriate licensed help before replacing them with another loan.

Put the explanation to work

Use your own dated inputs. Save a base case, change the assumption that matters, and compare the cash available and obligations in each case.

Official sources and further reading

Editorial review: 2026-11-06. Source pages may change. Follow the publisher’s latest release before relying on a current figure or rule.