Owning
your own home is part of the Australian dream. Entering the property market can
come with many ups and downs, but regardless of where and when you're buying,
the best thing you can do is to put yourself in a good position financially.
How much
can you borrow?
Whether
you are a single or a couple, the amount you can borrow will depend largely on
your income and your existing financial commitments. With a greater income you
have the potential to make bigger loan repayments, but if you already have
large loans or credit card debts, these will be taken into account when
assessing your borrowing power. Before approaching a bank or mortgage broker,
review your finances and establish what you could realistically afford to pay
each month.
Be aware
that earning power does not guarantee your eligibility for a home loan. Lenders
will look at your credit history, the size of your deposit, your age and
financial stability when assessing your loan application.
To have a
better understanding on what to expect before applying, it is advised to use a
free loan calculator.
What size
deposit do you need?
In the
past, a deposit of 20% was required for purchasing a home. Meaning that someone
wishing to buy a $500,000 property would need a deposit of $100,000. Lenders no
longer look for a deposit of this size, usually requiring as little as 5%
($25,000 for a $500,000 purchase), but there are a few things to consider
before rushing in to a 95% mortgage.
Having a
larger deposit means having a smaller mortgage. The more you can save for a
deposit, the less you will have to borrow, meaning less to pay back to the
bank.
With a
deposit of 20% or more you will avoid paying Lender's Mortgage Insurance, a
step lenders take to protect themselves in the event you cannot meet your
repayments.
Having a
larger deposit will also help with your eligibility for a loan. Banks can see
that you have the ability to save and therefore make repayments.
First
home owners grant
You might
have heard about the first home owners grant, a form of government assistance introduced in 2000
to help Australians purchase their first home. The nature and amount varies
from state to state, and can also change from year to year, so if you are
budgeting with the grant in mind, be sure to obtain up to date information on
what is available in your state.
The
scheme delivers a one-off grant to home buyers purchasing their first home, who
meet all of the eligibility criteria. The grant amount is often dependent on
whether you are purchasing a new or existing property, buying land, whether you
are buying in metropolitan or regional areas.
Bear in
mind that the grant may not be paid directly to you, but instead paid as a
credit against transfer duties.
Other
expenses
You home
deposit and size of your mortgage will be front and centre in your mind when
planning to buy a house, don’t forget the other expenses that need to be paid
as part of the process.
The exact kinds of costs will vary depending on
your situation, but some extras include stamp duty, real estate commissions and conveyancing and legal fees, building and pest
inspection fees, loan establishment fees, mortgage insurance and building
insurance.
how come australia one? u buying in australia ah?
ReplyDeletePIB : No lar, this is a guest post ;-)
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