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Are coastal homes an affordable dream?

Are coastal homes an affordable dream?

Amy Bradney-George investigates the value in coastal living.

October 27, 2009

A fall in coastal property prices over the past year has created more opportunities for people thinking of a sea change.

As people scrambled to snap up houses in metropolitan areas, competition on the coast has waned, but property research from RP Data suggests the tide will soon turn.

While that means affordability is ebbing, buyers still have a higher level of negotiation than they would in metropolitan areas.

City VS coast
The median value of coastal properties is about $70,000 less than the national metropolitan median of $487,000. This price difference makes it significantly more affordable to buy on the coast than in the city.

Say you wanted to save up enough for a 20 percent deposit on a home, based on the median prices for properties on the coast or metropolitan, you would need to save at least $14,000 more for a city home.

Opting for the average metropolitan pad with a home loan of $390,000 would cost over $105,000 more in repayments over 25 years than the average loan of a coastal property (which has a $334,000 loan size, and both examples used the average 5.7 percent p.a. variable interest rate).

Find the right loan
Regardless of property location, the overall costs and duration of a mortgage will vary with the rate of interest, which makes finding a good home loan essential.

The interest rate on a loan is as much of an investment as the house itself and it is common for people to take out a mortgage with lenders they are familiar with, instead of looking around for a better deal.

For example, you might go to an institution you already had a financial relationship with for a $270,000 loan with a variable comparison rate of 6.2 percent p.a.

To pay off the loan in 25 years, the monthly repayments would be $1,773, and the total cost of the loan would be $531,832.

Now let’s say you compared home loans online and found a better deal with a 5.5 percent p.a. comparison rate. Repayments would then be $115 cheaper per month than the 6.2 percent rate and you could also save over $34,000 over the life of the loan.

Savings of this magnitude give people the opportunity to increase their monthly payments, reducing the life of their loan and the overall costs.

Be it by the seaside, a quiet suburb or in the midst of the roaring city, finding the right loan makes any home worth it.

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