Ready to buy a home or investment? Online calculators are a great tool for working out how much you can borrow. But there are other factors in the equation too.
These are the big four.
1. How much is your deposit?
I have to admit that when it comes to property deposits, bigger is definitely better!
Aim for at least 20%, if you have more you can avoid mortgage lenders’ insurance which can be expensive over the duration of a loan.
Something really important to note here though, is that a bigger deposit doesn’t guarantee that you can borrow more money. However, a decent deposit does work in your favour when negotiating with lenders and it ultimately lowers the size of your mortgage, which reduces your repayments, and makes the mortgage that much easier to manage which means you can pay it off more quickly.
2. What is your income?
Not all income is treated equally, and if you’re self-employed and you’ve been down this road, you’ll know what I mean. Some lenders see self-employed or casually-employed people as a higher risk. This doesn’t mean that they won’t make the loan, it just means that they might want other types of financial guarantees to secure the loan, or may only offer you a loan that has a higher interest rate. This shouldn’t be in any way disheartening because once have been paying off the mortgage diligently for two or three years, you will be able to easily demonstrate good credit history with your lender and it may be possible to refinance your loan. Remember, as mortgage brokers we deal with this stuff all the time, so talk to us. We know what lenders want and we can help you devise the right strategy.
3. What are your expenses?
Get REAL about what you earn and what you spend. Make no mistake, the bank is going to go over your account transactions and your credit card purchases with a microscopic lens. So make sure you too, know exactly what your income and expenditure is. Banks like candidates who are articulate about their spending, not flaky. Do a budget – you might be surprised at some savings you can make.
4. What’s your ability to service the loan?
After considering the first three points, the banks then make a decision about your ability to service the loan you’re requesting. Most mortgage terms are 30 years, and you can nominate to pay weekly, fortnightly or monthly basis, depending on your loan. Other loans such as a ‘offset’ loan offer more flexibility because all your income goes against the loan and draw what you need to spend. There are many loan options.
BONUS TIP: Interest rates are still low and now is a good time to secure some finance. If you’re ready to buy, consider getting pre-approval of your loan, even if you haven’t found your perfect property. This not only gives you a good idea of what you can comfortably spend, but when you go to bid at auction it is actually required.
Want to find out more? Give us a call on 02 9518 5728 and arrange to meet face to face with one of our team and remember, there is no cost to you by working with us