Home Loan Guide
The joy of finding a new home that you finally want to buy, coupled with the anticipation that has been accumulating since you have been saving up for that deposit, ultimately leads you to the excitement of the home loan process. To make sure you know what you are getting into, we’ve compiled a list of things you should consider.
How much do you want to borrow?
Taking the time to figure out exactly how much you need for a loan is important, so that you don’t the situation of under-borrowing or borrowing too much – both of which can come with many financial consequences such as higher interest rates or repayments. As a general rule of thumb, your repayments should be no more than 30 per cent of your total income.
What do you need the loan for?
Not all loans are the same, and with different benefits and features for each you should take some time to think about how this will affect your circumstances. Different needs such as a loan for an investment property or for your first home, will suit different types of loans which can have some significant benefits to you and your ultimate repayment amount.
How much of a deposit is needed?
Generally, a deposit of 5 per cent of the value of the property you wish to purchase is what most loans and financial institutions would require. That said; there are options for all circumstances which will either limit or expand the loans you will be able to choose from.
What types of loans are there?
There are different mortgages based on your situation from a first buyers home loan, refinance home loan to an investor home loan. There are also elements such as fixed vs variable rates and interest only vs interest and principle home loans.
What sort of features can loans have?
Once you have decided what kind of loan you would like and how much for, there are other types of features and services that you will be able to include in your mortgage. Some of the most common loan features are:
- Additional repayments – the ability to make extra repayments, on top of what your regular repayments are, with or without penalty;
- Lump sum repayments – the ability to make bulk payments on an adhoc basis;
- Offset accounts – a separate transaction account that allows you to dip into your loan;
- Split option – the option to have part of your loan split and the other fixed.
Checklists of costs
To make sure you a thoroughly aware of the costs and fees associated with taking out a home loan, here are some things you should check off with your lender before you make your decision:
- Application fee/up-front cost
- Ongoing fee
- Additional repayment fee
- Late payment fee
- Break costs and exit fees
- Mortgage discharge fee
- Redraw fee
- Re-fix fee
- Switching fee
- Portability fee