Alongside getting engaged, married and starting a family buying your first home is a milestone that is major in life.
There are a lot of things to consider including where you want to live and what type of property you wish to live in.
That’s the fun stuff.
What a lot of people don’t put as much thought into is the type of home loan they choose and what exactly they are trying to accomplish. Let’s face it, you will be borrowing more than you have ever before, so it pays to spend a little time to figure out what you need out of the loan.
Here are 11 questions to think about
1) Would I qualify for a home loan?
- Lending policies can be very complicated and vary from lender to lender.
- Many things you think would be OK with your situation are not, such as your employment status and where the property is based.
2) What will I create by getting a home loan?
- This will vary depending on your current situation and your financial goals.
3) Are you currently renting?
- You can stop paying rent
- You can own your home.
- You can later use that equity to buy an investment property.
4) Do you want to invest in property?
- The property is an asset that appreciates in value.
- There are negative gearing benefits, which means minimal monthly repayments.
- Some lenders will offer 10-15 year interest only terms if you are in a strong financial position.
5) Do you want to eliminate debt?
- Bundle your debts and minimize your overall repayments.
6) Are you refinancing?
- Get lower monthly repayments
- Should I wait or should I act now?
- Will house prices come down?
- Will interest rates drop?
- The reality is, no one knows. Consider this, though: The official cash rate has been at a significant low since August 2013.
7) Can I afford the loan?
- To qualify for a mortgage, your income should outweigh your living expenses and debts including the new mortgage.
- If you are not able to afford an owner-occupied property, have you considered investing?
- In most cases, the rent will cover your mortgage repayments and, if not, you might just have to pay as little as $50-$100 a week (or less!).
- Plus, you can take advantage of negative gearing benefits.
8) How much deposit do I need?
- You need 5% of the purchase price plus 5% to complete the sale.
- These completion costs include stamp duty, legal fees and the bank set up charges.
- If you do not have 10%, you can still get a home loan with a guarantor or a gifted deposit.
- First home buyers might be eligible for a grant or stamp duty waiver, further reducing the deposit amount required.
9) What’s the best interest rate I can get?
- Interest rates are pushed all the time, and they can vary considerably between lenders.
- There can also be a massive difference in interest rates depending on whether you fix, split or choose a variable rate mortgage.
- The trick is getting expert guidance from a Mortgage broker.
- One of your local Awesome Lending Solutions Brokers will be able to over advice on the best product for you.
10) Should I fix, split, or go variable?
- Set your rate and lock in the right times.
- You can choose to fix your interest rate for 2, 3 or 5 years, and some lenders will even allow you to lock your rate for up to 10 years.
- You miss out on any further drop in your bank’s variable interest rate; you are extremely limited in making an optimum of $ 10,000 annually in extra repayments, and you will not get an offset account.
- Ride the ups and downs with a variable rate.
- Your price will move with the bank’s variable rate.
- Great if interest rates are coming down and you want to make unlimited extra repayments.
- It will work against you when rates are increasing so you should try to make as many extra repayments as you can.
- Split your mortgage and get the best of both worlds.
- You get added features like an offset account, redraw facility and a credit card with the variable element and, if interest rates do drop, you have an opportunity to fix that part of your loan.
- You can get a pretty competitive interest rate with your fixed component as well.
- You’re limited in the extra repayments you can make on the fixed element.
11) What are the features and are they for me?
There are two primary home loan packages in Australia.
- Basic package Fairly competitive rate.
- No ongoing monthly or annual fees.
- A good option for people who already have an owner-occupied property and want to invest in an investment property.
- It’s cheaper and, at the end of the day, your aim in investing is to minimize your costs and optimise your return.
- Professional Package competitive rate.
- You get an offset and redraw facility.
- You are eligible for insurance discounts.
- The major downside is an annual fee (usually around $395).
Not sure how to answer all of these questions? An Awesome Lending Solutions Broker can guide you through all of this and guarantee that you are getting the right home loan to fit best your situation.
Click on the link below and we will be in touch before you know it.
Call Awesome Today