14 Jul 4 things to think about before taking out a mortgage
Investing in property has been a great way for many Australians to build wealth over a long period of time.
However, for first-time buyers, it’s important to make sure you understand what you’re taking on and how to manage your repayments.
Here are four factors to take into consideration before taking on a home loan.
Find a property you can afford
While your mortgage broker is going to be able to help you compare your home loan options and find the best interest rate for your personal circumstances, it’s still important that you are going to be able to afford your repayments.
With interest rates on the rise, it is vital that you set your sights on a property that is within your budget. Just because your borrowing capacity is at a certain level based on your income, doesn’t mean that you need to purchase a property up to that total value. You can still purchase a less expensive property and know that you have enough capacity to service the debt.
You don’t have to buy your dream home on the first go, it’s often far more prudent to just get into the market and then look to upgrade over time.
Taking on a home loan is a big commitment. For most people, that means you will need to manage your money well and make repayments for the next 30 years.
For first home buyers, starting to implement sound money management practices before you ever have a home loan will put you in good stead. It will also likely be a big reason why you are able to save up the appropriate deposit to begin with.
You don’t need a 20%
Many new buyers incorrectly believe they can’t get into the property market because they haven’t saved up a large enough deposit. While a bank does like to see a 20% deposit, there are many ways you can get into the market with far less than that.
There are a number of Government schemes for first home buyers that allow them to enter the market with as little as a 2% deposit. There are also guarantor loans, where your parents will be able to help you get a loan by putting up the equity in their home. Or for investors and non-first home buyers, you can opt to pay Lenders Mortgage Insurance (LMI).
Speaking to your mortgage broker in Melbourne is often the most effective way to gauge your options and what you will need to put down as a deposit.
Think about loan features
While most people are focused on their interest rate, when you look to get a home loan, it’s well worth having a discussion with your mortgage broker about what type of features you need.
Options like offset accounts can be incredibly valuable in saving you interest and can also help with your money management. Other features like fixed rates, or even interest-only loans can also be important depending on your personal circumstances.
These features can often save you a significant amount of money over the long run, so it’s well worth thinking about them in advance.
Are you currently in the market for a new property? Get a clear understanding of how much that property might be worth with our free property report.