Purchasing property is a big decision that requires careful consideration, particularly when it comes to financing. Buyers must consider a number of factors that will affect their ability to make a deposit, secure a mortgage and make monthly payments.
It is important for buyers to fully understand these factors and if possible, work with a qualified financial advisor to ensure they make the best decision for their financial situation.
Whether you’re a first home buyer, or purchasing an investment property, here are some tips on what buyers should consider when purchasing a new home.
It’s crucial to be realistic about what you can afford in terms of borrowing money and monthly repayments. Your income, “monthly expenses”, and savings position are key determinants in your ability to borrow for a home loan. So plan prudently while factoring in all these aspects.
There are extra expenses to consider when buying a home, beyond just the purchase price of the land and the build itself. Some of the things you need to consider also include stamp duty, conveyancing fees and council rates.
It is important to take these associated costs into consideration to help ensure you have a more accurate understanding and to better prepare financially for this significant investment. If you’re unsure, this is where a financial advisor can be helpful.
Learn how to evaluate what is essential for you and become mindful of where your hard-earned money goes!
You can look at reducing the number of credit cards and Buy Now, Pay Later schemes. Setting a monthly budget and sticking to it can help with budgeting for your finances too.
When looking at borrowing money, your financial institution will review a minimum of 3 months of living expenses to ensure you can comfortably meet your mortgage payment. So reducing your ongoing costs will help with your borrowing limits.
Lenders evaluate the stability of a borrower’s employment status and duration of stay in their current residence. Regular change of employment as well as a residence may be considered unstable from a lender’s perspective, and can negatively impact your eligibility for a home loan.
Bank interest rates are determined by the Reserve Bank. In the current climate of high inflation, the interest rate has continuously increased over the past year with future fluctuations uncertain.
With property purchases and builds, land titles can take time, and the possibility of higher rates will impact borrowing limits affecting eventual budgets.
Understand the current market, and account for possible fluctuations by considering a higher contribution or a lower property purchase or build price.
A benefit of purchasing when interest rates are up, if your budget allows you to, is that you have experienced the market at its toughest.
When interest rates then go down, you’ll be able to refinance to a better rate. In a less competitive market you’ll also have more choice and options available to you as others postpone purchasing until interest rates go down.
The choice ultimately rests on your personal preference. Typically, lenders will offer Variable Rates during the land purchase and construction, allowing you to fix the rate upon construction completion.
There are both pros and cons with either option, and you must consider all the features and benefits to make an informed decision.
> Variable Rates offer flexibility regarding repayments and allow fee-free access to additional loan repayments. However, the applicable rate is exposed to the market rate and Reserve Bank, potentially leading to increased repayments. On the other hand, in a reducing rate market, your mortgage payment can decrease.
> Fixed Rates guarantee peace-of-mind with a fixed mortgage payment for the agreed term period. Although, there are restrictions on additional repayments that can be made and access to additional repayments is usually not allowed.
Using a mortgage broker can be a great asset to the home-buying process, providing insight into the different loans available. With their in-depth understanding of the market and industry, they can save time and suss out any hidden costs of buying a house, guiding you to make smarter financial decisions.
We have teamed up with a highly experienced mortgage broker – Bill Jara, a Senior Lending Manager at Loan Studio who specialises in residential mortgages. He can assist you and answer your questions about how you can finance your new home.
Want to chat to a member of our team? Our friendly sales team are always happy to help answer any queries you may have.
If you wish to speak to our sales team, please feel free to reach out on either of the following methods:
Phone: 1300 983 889
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