Whether you are buying your first home, purchasing an investment, or downsizing from a previous home, there are many things to consider when deciding to borrow money to purchase a property.
It is important to do your research and understand the different aspects of borrowing to ensure you take up the right mortgage solution that best suits your individual needs right now, but also in the long term.
Here are our top five things to consider before locking yourself in to a property loan.
How much can you afford to borrow?
How much you CAN borrow is not always the same as how much you SHOULD borrow.
It might seem like we are stating the obvious, but it is important to remember that the more you borrow, the higher your mortgage repayments will be.
This means you should carefully consider how much you can realistically afford to pay back each week, fortnight or month based on your current income, taking into account any changes that might occur in your income in the future.
If you were previously renting you may also need to allow room in your budget for extra household expenses such as building insurance and council rates, which you may not previously have been paying.
What type of loan should you take out?
Fixed rates, variable rates, split loans, honeymoon rates, redraw facilities, offset accounts – there are many different combinations of loan types and features available these days.
Interest rates can vary, as can the fees associated with different types of loans. Many lenders will charge an annual fee on home loan packages which may include a discounted interest rate and access to other features or benefits.
A fixed loan provides the security of knowing your repayment amounts won’t change, but if you think that interest rates might drop again in the future you might prefer a variable rate.
What fees and charges do you need to allow for?
When purchasing a property you will need to allow for additional costs over and above the purchase price of the property.
Not all of these costs will apply in every situation, but it is important to check which fees and charges will apply to your property purchase.
- Mortgage fees
- Valuation fee
- Survey fee
- Broker fee
- Stamp duty
- Conveyancing fee
- Land Registry fee
What will the lender take into account when assessing your application?
The lender will consider your current and historical financial position, make some assumptions and draw some conclusions about your future ability to service the loan you are applying for.
You will also be assessed against the lender’s credit risk criteria, and the Banking Code of Practice requirements in relation to the provision of credit and general standards.
Some lenders have tightened up their requirements for those who are casual workers, self-employed, relying on dividend income or working in an industry that has been hit hard by COVID-19 related restrictions and business closures. Banks and other lenders are also looking more closely at the living expenses of loan applicants and you may be asked for more information about your discretionary spending habits.
Should you seek pre-approval for a loan?
Loan pre-approval usually lasts for three to six months and shows a vendor or agent that you are eligible to apply for a loan up to the pre-approval amount.
It doesn’t lock you in to a loan, but it does mean you have a price range to work with and signals to sellers that you are serious about purchasing a property.
The pre-approvals process is usually a streamlined form of loan application, where you provide evidence of your current financial situation and the lender assesses your ability to repay the loan. You will then be required to complete the full loan application process once you have found a property you wish to purchase and confirmed the amount you wish to borrow.
Applying for a loan can seem like a complex process but taking the time to do your research first will ensure you are knowledgeable and confident about the loan you are applying for.
URB4N Apartments are currently available from just $399,000 but the prices will be increasing during April 2021 so please get in touch now.
If you’re ready to enquire about purchasing your own URB4N Apartment, please contact Constantine Pappas on 0423 047 020 or email firstname.lastname@example.org.