If you’ve made the decision to buy your first home it’s a pretty safe bet that you’re feeling a little daunted by the whole process. Add to this that as of January 2016 the NSW government’s First Home Owner Grant will be reduced from $15,000 to $10,000 and you might getting a little overwhelmed. But, armed with the right information and knowledge, taking out a first home loan to secure your dream property doesn’t have to be scary.
Here’s our guide to help you find your first home loan.
1. How much you can borrow vs how much you should borrow
The first step you should take is to determine how much you can borrow as a first home buyer. Lenders will determine how big a home loan to lend you by assessing the amount of monthly repayments you can comfortably afford, among other factors. Experts say that spending above 30 percent of your household income on a home loan could lead to mortgage stress. This is where it’s important to remeber that even though you can borrow a certain amount it doesn’t always mean that you should. Be honest with yourself about how much you can afford and consider possible unexpected events in the future such as the loss of a job or arrival of a child.
2. Calculate your mortgage repayments
Use a mortgage calculator to help work out the cost of servicing your first home owner loan. RateCity has a free home loan calculator, which you can use to estimate mortgage repayments – it also helps you calculate the interest you might save by making additional repayments, for instance. When budgeting for home loan repayment costs, make sure you factor in the possibility of rising interest rates. As a rule of thumb, allow for rate hikes of 2 percentage points, which could bump up monthly repayments by more than $350. Factor these payments into a montly budget and consider how much money you would have left over for living expenses. Don’t forget to consider any roadbumps that may occur in the future and discuss how yout repayments could be made in the event of a lifestlye change.
Finally, compare home loans online to narrow down a home loan that is going to best suit your needs. A bit of time spent comparing home loans in the beginning could mean great savings for you in the future. Having a look at the options on the market means that you will be making a n informed decision which could prevent you coming across issues in the future. Gather as much comparative info as you can and get yourself a good deal.
By following these three steps you will be well on your way to estbalishing what you can afford and who will offer you the best deals. From there it’s time to start finding that dream home with the confidence of knowing you have considered the financial side of things. Visit the RateCity home loans guide for further information on seruring a loan.