Buying a home is one of the most important decisions anyone will make in life. From the selection of lot to the selection of payment scheme, the process involves physical, emotional and financial decision-making that can be overwhelming for first-time home buyers. Given the range of options on the market, you’ll need all the help you can get.
For payment, taking out home loans is the most useful and affordable option for first-time buyers. If you have fewer financial resources, a home loan is an excellent way to get off the ground.
If you’re considering taking out a home loan, it’s easily the biggest financial transaction you’ll make in your life. So it’s vitally important to make sure you’re choosing the home loan that’s right for your circumstances.
Ask yourself these four questions when choosing a home loan and you’ll be on your way getting yourself the best possible deal.
1) AM I ELIGIBLE FOR A HOME LOAN?
Not everyone can apply for a home loan. Before moving forward with any application, make sure that you meet the criteria of your chosen lender. Standards vary among loan providers when it comes to eligibility, and you may not qualify for all of them. In general, lenders are looking for someone who can prove that they are able to repay the loan and interest as agreed upon.
To apply for a home loan, you must be a citizen of Australia, over 18 years of age, have a stable job without frequent breaks in between, and you must not have moved between more than three employers within two years. If you are self-employed, you should have the proper documentation.
2) What fees and costs will be included?
Banks and other home loan providers are very competitive, offering all sorts of features to get your signature. But beware: extra features mean extra costs. It’s important to asses each feature and determine whether you’ll use it. For example you might plan to move up the property ladder in five years, so the chance to transfer your loan to the next property (portability) may be appealing.
When it comes to fees, there can be plenty of hidden fees, like application fees or redraw fees that negate the benefits of a lower interest rate. It can be hard to compare like for like with lenders providing a combination of fees, but taking the time to compare the total costs can save you thousands down the track.
3) Should I use a mortgage broker?
Why do the work yourself? If you engage a mortgage broker, they can do the comparisons for you, finding the best deal and helping you submit the application. But, mortgage brokers are paid on commissions from lenders, so you can never be truly sure their recommendations are based on what’s best for you. Mortgage brokers don’t have relationships with all lenders, so the deals they’re offering you may not reflect what the broader market has to offer.
However, with tight regulations on mortgage brokers in Australia to ensure their professionalism, you can be confident that most brokers offer a genuinely valuable service.
Ask your potential mortgage broker these questions:
|·||How many providers do you work with? Is it a range of bank and non-bank lenders?|
|·||Are you a members of the Mortgage & Finance Association of Australia and/or the Finance Brokers Association of Australia?|
|·||What commission will you receive? (Legally they are required to disclose this.)|
|·||How do you feel interest rates will fluctuate in the short and long term and how will this potentially affect me?|
|·||How do I know you are looking after my best interests?|
Putting your mortgage broker through his or her paces will give you peace of mind that you’ve selected the right person to help guide you through the process
4) How will my circumstances change?
Get your crystal ball and start gazing! It is very hard to predict the future, but you need to consider all eventualities. If you start a family, could you make repayments while on parental leave? What about if you lost your job? Is the value of the property likely to increase or stagnate? Some scenarios may seem unlikely now, but it’s important to have built in contingency in your home loan so that you can maintain the debt even if your financial circumstances change.