What to consider when getting a mortgage

Mortgages - things to consider
 
Saving up for a deposit is the first major milestone to getting a mortgage (or home loan) and is one of the toughest to achieve. Frustratingly, getting a mortgage involves far more than simply achieving a savings goal; the approval process can be tedious and emotionally draining.

Here are some factors that can make the mortgage approval process easier.

Show you are reliable

A home loan is the biggest financial commitment most people ever make and lenders want reliable candidates. The application process is designed to prove this reliability, so having all the required payslips, IDs, and general proof of all your financial activity on hand, in chronological order can speed it up.

Do a financial review

The requirements depend on the lender, but they all appreciate having extra support for your application and timely responses. Before you apply, going through documents like credit card statements and old bank accounts, can provide a realistic picture of your financial position and potential ways to save more if needed.

Check your credit score

A poor credit score can scupper a home loan application. You may have forgotten to pay an invoice that was sent to an old address. You can get a free credit score reports from providers like CheckYourCredit, Experian Credit Report or GetCreditScore. Knowing your score can help you address anything that could get in the way of your home loan.

Mortgage interest rates

Possibly the biggest factor to consider and understand is the interest rate on the loan. As interest rates are a key figure in determining how much you will pay, they also impact how much you can borrow in the first place. Paying 5% instead of 3.5% rate on a 30 year loan of $400,000 would mean an extra $351 each month.

Using online mortgage repayment calculators shows the impact of different rates and helps you plan for a budget that includes your mortgage repayments. Also consider that this relatively small change in interest rates can add an additional $126,000 to the loan over the 30 years.

Different types of mortgages offer various payment structures that are related to the interest rate – for a fixed, variable or interest only loan can result in very different final costs.

Interest rates are a powerful factor in mortgage payments and need to be carefully considered before committing to one.

Do your mortgage research

There are literally hundreds of different types of mortgage offerings available, this can be overwhelming when deciding who to approach for a mortgage. This is why it’s important to know which is the best option for you and understanding all of the loan’s implications.

Use resources like the ASIC MoneySmart website to understand what LVR, LMI and fixed versus variable loan mean. Similarly, knowing about ways to reduce costs, such as eligibility for the first home owners grant, can make a significant difference to your mortgage payments.

Home loan approval + mortgage repayments = paying lots more $$$

Okay – technically not a tip, but… be prepared for other additional costs. There are upfront costs like stamp duty and insurance, then discretionary wear-and-tear repairs, home improvements and of course interest rates will go up! Considering these factors in your loan amount can have a major impact on your lifestyle in the long-term.

Friends, family and Google

Finding the mortgage that’s best for you is not straightforward, but there are endless comparison websites like Canstar to help figure out your options. Family and friends can give you their tips or you can negotiate directly with lenders yourself.

If you’re overwhelmed with all the information available that’s why mortgage brokers exist.

Mortgage brokers

Mortgage brokers can help you navigate the home loan market. A good mortgage broker provides expert guidance through the process and has a network to find suitable loan options for you. Be aware some mortgage brokers might not have access to all the deals and may receive commissions.

New online platforms like Hashching provide a platform for borrowers to access home loan deals that have been pre-negotiated by brokers. They’ve made it easy to contact verified and reviewed brokers online.

 
The best preparation to get a mortgage is to do your research, understand your financial situation and what you can realistically afford and be willing to shop around for the best mortgage deal for your situation.

 

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Megan Stals

Analyst, Stockspot