Matching a suitable mortgage to your needs may save you thousands interest payments over the life of your loan
With so many loan products available you can be sure there’s at least one that matches your situation. In your hunt to track down a suitable mortgage, here are a few points to keep in mind.
How much should I borrow?
Banks will determine how much they are willing to lend you based on a number of criteria; however, that doesn’t mean you should take the maximum amount they offer. Closely examine your finances to determine what you can afford to spend. Be honest and work out a realistic budget, factoring in all regular commitments, such as school fees, car payments, and food, as well as all those entertainment expenses. What’s left can be channelled into any mortgage repayments.
What type of buyer are you?
Your personal situation will determine what mortgage suits your needs, as well as what type of products are actually available to you. Are you a first time buyer, for instance, or are you refinancing an existing debt? Perhaps you’re looking for solid capital growth in an investment property or the home you’ll spend the rest of your life in? It’s important to consider why you’re buying and finding a mortgage that complements that.
Do your homework
Speak with your mortgage broker – they’re in a great position to help you compare different loans and lenders to see how they suit your circumstances. Decide what loan features you require to meet your objectives – for example are you looking for flexibility to pay off your mortgage quickly? – and then go in search for a suitable deal. Some of the most common loans that may meet your requirements include:
- Fixed rate - can help soften impact of any future rate rise
- Split rate - offers the security of fixed rate with the flexibility of a variable rate
- Line of credit - good for financing renovations or additional property investments
- Lo-doc - for the self employed, usually require less documentation, such as establishing proof of income
- No deposit - can’t save for a 20% deposit? This loan will let you finance 100% of the purchasing price, although usually with a parental guarantee
- Interest-only - popular for investors who don’t want to pay the principle component of a mortgage. Usually lower repayments amounts, leaving room to pursue other investments
- Construction - for additions or building your own home
There are a range of tools now available, such as the internet, to help research, compare and contract loans. For many borrowers, however, lending advice from a broker is the easiest and usually most effective option for avoiding confusion and finding an appropriate loan for your needs.