Deciding to purchase a home is perhaps the easiest part of the home buying journey. It’s what follows that requires real patience and diligence, especially finding a home loan to finance your purchase. It’s always better to put some additional effort into selecting the right home loan now, which can help you plan your finances and future better. Here are a few things you can start doing right away to help you get a competitive deal for financing your home.
Shop around
All home loans are different, and what works for your parents or friends may not be suitable for you. That’s why it’s vital to shop around for home loans, so you know what’s on offer and pick one that’s right for you. Luckily, you no longer need to visit lenders themselves or even step out of your home to start your home loan search. You can begin comparing home loans online from the comfort of your computer, tablet or even smartphone and start narrowing down your options based on what you need.
When comparing home loans, we recommend that you consider the comparison rate. This rate gives you a more accurate picture of what the loan is going to cost over its full term. Lenders work out the comparison rate by combining the loan’s interest rate with other costs and fees and express it in the form of a percentage. This makes it easier to compare the true cost of one loan against the other.
Crunch the numbers
Before you apply for a home loan, figure out how much you can borrow by calculating your borrowing capacity. Borrowing capacity is a term used by lenders to describe how much money you might be able to borrow, depending on your financial situation. Some of the factors that affect your borrowing power include your income, your existing debts, active credit cards and the amount you have saved up for a deposit. You can use an online borrowing capacity calculator to get a rough estimate of how much lenders may be willing to let you borrow.
Once you determine the approximate amount you can borrow, head to a repayment calculator to crunch the numbers on the home loan repayments. These calculations will give you an idea of your monthly repayments to determine the right-sized loan for you. It’s also smart to use a higher interest rate, one to three per cent higher, than what’s advertised for your calculations. This will allow you to include a financial cushion that protects you against any future interest rate rises.
Educate Yourself
You can seek professional help from a mortgage broker to find a suitable home loan for your circumstances. Whether you’re working with a mortgage broker or direct with lenders, it’s good to educate yourself about home loan basics. This includes common industry jargon and essential home loan features which will help you navigate the market with confidence. Understanding the various features that could be available with your home loan will make it easier for you to meet your monthly repayments and cater for emergencies. It will also save you money in the longer term.
You can head to our blogwebsite to learn more about home loans or connect with a mortgage broker to find out the offers that you might be eligible for.