Are you a first home buyer or buying your next home? Here are our Top 5 things you should consider before taking the leap into the property market.
Bigger Deposit, Better Position
While some lenders can offer low-deposit loans for less than 5 percent of the purchase price, saving around 20 percent can offer you bigger benefits:
- Access to a wider pool of lenders and products
- You need to borrow less money overall
If you’ve saved less than 20 per cent there are lenders who can help, but deposits of that size may require Lenders Mortgage Insurance (LMI). This adds more fees and another layer of assessment of your suitability because LMI providers are separate businesses and may have different requirements to the bank or lender providing you with your home loan.
Lender’s Mortgage Insurance is a policy that protects the lender in the event you default on your mortgage repayments. It is a one-off payment that is typically required for home loans where you’re borrowing more than 80% of the purchase price.
Know Your Credit Score
Your credit score is a number that represents your financial history. It’s what banks and lenders often use to help them decide whether they want to lend to you. Because your credit score is closely linked to the success of your home loan application, understanding what makes up and affects your credit score is important for any homebuyer. Checking it often can also help prevent any surprises before you make your home loan application. You can request a free copy of your Credit Score report through 8 Collective.
Work Out What Your Bottom Line Looks Like
You probably know where you want to buy and how much you want to pay; now it’s time to work out how much you can reasonably borrow.
You’ll need to take the various home loan fees into account, like stamp duty and legal fees. You should also think about your current situation, your income and expenses, any dependents (kids or parents), and any lifestyle changes you can see coming up – like a job change or starting a family. Think about what’s likely to happen in the near future – as well as how it is right now.
Find the Home Loan That Fits
There are more things to consider with a home loan than just the interest rate. There are redraw and offset facilities, refinance costs, repayment flexibility, fixed or variable interest rates, loan terms and fees to consider. Engaging with a broker like 8 Collective means you don’t need to worry about shopping around and losing valuable time finding the right home loan. We do all the hard work for you.
Do Your Research
Often the difference between a diamond in the rough and a dodgy deal is simply the buyer’s level of market knowledge. The more you know about the property market and where you want to buy, the better. Look at average prices over the last decade, whether it’s near to shops, schools and transport, potential rental returns, etc. You want to be sure the area has what you need in terms of both lifestyle now and future growth opportunity.
Alternatively you can always engage with a buyers agent like Purple Avenue.
“A buyer’s agent has their finger on the pulse when it comes to the property market and are across the type of offer you’ll need to make to get the home you want.” Marcus Feasey. Buyers Agent, Purple Avenue
If you’re a first home buyer ready to enter the market or looking to buy your next home, keep these tips in mind or if you need further assistance, feel free to have an obligation chat with one of our experienced finance consultants.
*image source: Newstart Homes