Most Australians dream of owning their own home. However there is such a large number of loans and lending solutions designed for different circumstances. This can make it hard to understand the process of applying for a loan and the implications involved in your decision.
This guide to Gold Coast home loans will walk you through the basics of a mortgage and the tricks and traps to consider before taking that initial first step. After having gone through this free resource, you will:
A mortgage is an offering of a property as security for a loan. The loan finances the property, with the property being owned by the lender until payment has completed.
By obtaining a home loan, the borrower is able to buy a house or other real estate. This guide will cover the basics involved in home loans; both obtaining a home loan and paying it off.
At Professional Lending Solutions, we have defined home loans into two types, so you can understand the home loan process. There are two main types of home loans in Gold Coast you can choose from:
Mortgages are taken out over an agreed term, generally 25-30 years, and are thus classified as a term loan. Regular repayments are made throughout this period, according to the interest rate that applies at the time. Longer mortgage terms will result in lower monthly repayments but the total repayments over the life of the loan will be more than shorter-term loans.
Term mortgages include subcategories such as:
A line of credit loan allows you to access the equity in your home to use as you wish. It is an ongoing loan and generally comes with a credit card. This type of lending is useful to pay for costs including renovations on your home. Your salary and other income dividends are directly credited to the loan, you use the lender’s credit card for everyday expenses and make a single payment sweep at the end of the month – paying off the credit card. This maximized repayments on the loan reducing interest and enabling the loan to be paid off sooner.
Home Loans come in many forms, due to the many components that make up the loan. The most important component of a mortgage is the interest rate charged by the lender. If you want a loan of $400,000, you will have to pay back that money plus the set interest.
You will typically make these repayments monthly, although there are options available to make repayments fortnightly or weekly, with the interest that you pay compounded with each repayment.
Over time, the lender will change your interest rate, meaning that the amount of your repayments will either increase or decrease. If you are uncomfortable about the possibility of having to pay more per month, you may wish to consider a fixed-rate mortgage, where the interest rate stays at an agreed level.
The interest rate of a variable rate loan will fluctuate from time to time. Some variable-rate mortgages include:
Standard variable rate mortgage:
this is a mortgage at the lender’s normal rate.
Discounted rate mortgage:
this is a mortgage that starts with a low-interest rate. Check what the rate is after the discount period and whether there are early repayments fees if you pay the mortgage out during the discount period, or after.
Fixed-rate loans generally have the interest rate fixed for a term from one to five years with lenders occasionally a ten-year term.
This type of loan offers more certainty, as borrowers can be sure that their repayments will stay the same each month and not fluctuate with changes in interest rates. Fixed rate home loans are especially attractive to those planning to remain in the property long term, as they provide security in terms of budgeting and financial planning.
In the long term, buying a home can be more cost-effective than renting one. You probably already know this, that is why you’re gearing up on your journey to buying your first home.
The best way to prepare yourself for this undertaking is by arranging a consultation with a finance broker Gold Coast. Sure, you can read up on the basics online or browse through loan terms, but having a smart, practical and knowledgeable expert guide you through the process can make all the difference.
Plus, having an extra pair of eyes on your finances makes sure you get the best first home buyer deal – and that’s just good sense. So if you’re ready for a first conversation about first home buying, take the first step and talk to one of our experienced mortgage brokers today.
But before you do, you need to consider the below factors:
To research homes available for sale, visit real estate agents and search internet sites to find areas that have the potential for growth.
Talk to one of our brokers who has access to a number of databases that can give you the inside information on a property you are looking at, like how much the owners paid for it, what the land value is and what has sold near it recently.
To determine how much you can afford, you must first analyze your current income and expenditure to decide how much you have leftover for mortgage repayments.
To help you review your personal financial situation, create a monthly budget worksheet to track your expenses and discover where you spend your money.
This could include:
Food
Housing (rent or mortgage)
Travel expenses (petrol, car maintenance etc.)
Utilities (mobile phone, water, heat, etc.)
Insurance (car, homeowners, health etc.)
Taxes (income etc.)
Credit card
Clothing
Entertainment (restaurants, movies etc.)
Vacation/Holidays
Alcohol and tobacco (if applicable)
Pay TV and internet expenses
To find your discretionary income subtract your total expenses from your income.
Post-tax income – Total expenses = Discretionary income
The amount left is money through which you can save or put towards your short and long term goals.
The amount you can borrow is dependent on a number of factors, such as expenses, income and current debts. Most lenders will base the size of your Gold Coast home loans on your capacity to meet monthly repayments.
Just like loan amounts, the deposit required may vary from lender to lender. Some lenders offer 5% deposit home loans. Depending on the location of the property or the type of loan, you may need a deposit as high as 20%.
However, there are times where no deposit is required, such as, if you already own a property, you have a reasonable income, or you have a guarantor. Alternatively, you will need to demonstrate the following (as a guideline):
Establishing your short and long-term goals is important so that you ensure you put enough money aside to pay for these expenses in conjunction with your mortgage repayments.
The amount you can borrow is dependent on a number of factors, such as expenses, income and current debts. Most lenders will base the size of your Gold Coast home loans on your capacity to meet monthly repayments.
Typically, lenders prefer a 20% deposit but many have a minimum as low as 5% of the purchase price. There are also instances where you may be able to obtain a home loan with no deposit, such as when you can access equity of an existing property, you have a guarantor, or you can demonstrate a mix of genuine and non-genuine savings like monetary gifts or inheritance.
Where a variable interest rate fluctuates from time to time according to the lender’s current interest rate, a fixed-rate loan generally has the same interest rate locked in for a term from one to five years. It is best to speak to a mortgage broker about which will suit you best for your personal situation and financial goals.
An experienced mortgage broker will guide you through everything you need to make sure your application has everything a lender will need to give you approval first time around. A mortgage broker has a legal duty to work in your best interest – banks don’t! – and they can review your financial situation in order to match you with the right lender and home loan product.
Pre-approval allows you to have your finance application assessed by the lender before formal approval. This is a great idea because you will know how much the lender will give you for your home loan and that puts you on the right foot for looking at the right homes in your budget and confidently making offers you know you can afford.
Getting a mortgage broker on board when buying your first home can help you to secure the best loan rate available and save time researching different lenders and their requirements.
Mortgage brokers also have experience and knowledge in navigating the paperwork process, as well as understanding all of the details that come with a home loan. They can help to make sure that you get the best deal possible, as well as providing advice and guidance throughout the entire process.
At Professional Lending Solutions, we make sure we find the right lending solutions that best match your current circumstances and needs. We also take into consideration the lender’s costs, service history, and accessibility.
We like getting to know you so that we can provide you with what you need and not just what you have asked for. This also helps us provide a greater picture to the banks and other lenders when seeking funding for you.
We are a team of very experienced brokers that are a part of a large network that supports each other. We aim to provide you with the most up-to-date lending solutions in the market.
