The First Home Owners Series: How to secure the best mortgage for my first house?

171127_Kingscoin_FHB Blog EDM_LM3.jpgBefore any prospective home owner can start house hunting, a loan needs to be secured. This process can be extremely overwhelming and, with so many options out there, it can be hard to sift through it all to find the right answer.

But there’s one question that’s on every first home owner’s mind: How do I find the best mortgage. First of all, you want the most savings (and as little debt) as possible. Create the best scenario for yourself as you begin to think about home ownership.

Plan a budget and stick to it. Pay off as much debt as you can. The bigger the deposit, the better. This will show the banks that you have financial discipline, while this also increases your equity in your property from get-go. Set up a high interest savings account. Make your home loan deposit your number one priority. This might mean sacrificing some lifestyle luxuries for a couple of years, but it’ll be worth it.

How do I get a home loan?

Okay, so once you’ve got a healthy amount of money sitting in the bank, it’s time to start searching for the best loan.

There are three main ways you can secure a loan: From a bank, a mortgage broker or online. The online application is the easiest, but for newbies, you might want more support. If you’re comfortable doing it yourself, start by searching ‘home loan application online’. Use a home loan calculator to take the guesswork out of your loan repayments. Find a bank you trust then, it’s just a matter of applying.

If you prefer to go to the bank, organise an appointment with them. They’ll go through questions such as what property do you want to buy, have you got a deposit, and do you have a full-time job. Be prepared with your answers.

Similarly, you can also get a home loan from a mortgage broker. They’ll go through various banks to find you the best deal so make sure you have all your documents ready including bank statements. Your broker will be able to guide you through the process.

Different banks will have their own requirements. The main one being minimum wage and permanent citizenship.

Home loans to avoid.

Have you heard of the honeymoon loan? Banks target first home buyers with cheap rates for a certain period of time. Designed to entice a home hunters eye with a low introductory rate, they can trick people into entering the market who aren’t properly prepared.

The catch is, the low rate only lasts for a limited period of time, usually one or two years. The introductory rate comes in two forms:

  1. Fixed discount rate: The discounted rate will move with the market. For example. If the standard variable rate rises by 0.30%, so will the discounted rate. If the rate drops, so does the loan rate.
  1. Discounted fixed rate: This is a fixed rate and won’t fluctuate.

Hidden costs to be wary of.

As well as falling for honeymoon loans, do your best to avoid Lenders Mortgage Insurance (LMI). This is the insurance you pay which protects the lender if repayments aren’t made. It’s usually only required if you borrow more than 80% of the value of the property.

This brings us back to our first point of saving as much as possible. The bigger your deposit, the less you’ll need to pay on LMI.

The length of time it will take you to pay off your home loan depends on a range of factors – how much you borrowed, if you have children (and how many), whether you’re married, and any extra costs you may have. Take into these considerations when figuring out how long it’ll take to re-pay your mortgage.

Buying your first home is life-changing experience. Don’t rush it and educate yourself as you start to consider home ownership.

Topics: Advice, Buying Property, Adelaide Property, Home Ownership, First Home Buyers

KingsCoin are a leading boutique property development business based in Adelaide, South Australia. KingsCoin create investment opportunities, as well as offering investment strategy, project and property management services tailored to your needs. KingsCoin seek to maximise your returns at every possible opportunity.