9 Key Steps in Home Loans Application
- Step 1: Save up for deposit
- Aim to save at least 20% for deposit. Otherwise, there are options if you don’t/can’t save for a deposit or at very minimum 5% saved “genuinely”.
- Avoid paying the lenders mortgage insurance (LMI) by paying more than 20% or more on deposit.
- Use an appropriate calculator (budgeting/repayment).
- Step 2: Questions to answer
- This will be important in the succeeding steps.
- How long are you planning to live in this area/location?
- Who will be living there-are you planning a family-or reducing size of current family, kids leaving soon
- Have you researched facilities/amenities/services in this location?
- Will you need to let out to take a job elsewhere someday?
- Step 3: Know your budget
- You need to manage your expectations relative to your budget.
- Have you used our Intellichoice budget calculator?
- What is your income likely to look like in the future?
- Will someone else be contributing?
- Step 4: When comparing lenders, consider these:
- Ask from at least two or more lenders as a comparison.
- Who authentically aligns with your beliefs/values?
- What track record does the lender possess?
- Would you feel proud to be associated with this lender?
- Step 5: Choosing the best deals/rates
- Fixed vs. variable rate
- Remember, getting a mortgage is a long-term commitment. Be ready.
- Who is explaining the products & features to you-the bank who has a vested interest in making a sale-or a broker who is searching for a suitable product?
- What is the actual three-year cost versus the “here and now cost”?.
- Step 6: Consider the costs
- The cost of getting a mortgage does not end with the interest rates.
- Generally, you still have to pay for stamp duty, legal fees, processing fees, etc.
- Some lenders waive these fees, so you need to take this into account when choosing the lender
- What are upfront costs?
- What are ongoing fees?
- What are exit fees?
- Is there any way to avoid paying for these fees?
- Step 7: Only borrow what you actually need
- You need to also take note all the other expenses associated with your new home.
- It can be easy to borrow more to help furnish the home-but should you really be doing that?
- Can you hold off on doing the renovation until 6-12 months after moving in?
- Step 8: Make repayments
- Make sure you make the repayments religiously.
- Generally, it will be advantageous on your part to pay fortnightly as opposed to monthly due to interest savings.
- Have you considered insurances in case something unforeseen happens?
- Are there “buffers” in savings to protect against another Covid-like event?
- Step 9: Dangers and when to ask for help
- Real estate is a major investment and the number of homeowners in Australia who are on the brink of default has surpassed the 1-million mark with 28,000 are in serious debt trouble.
- Always get in touch with your broker/lender if you experience any mortgage-related issues.
- If you’re struggling with the repayments, it’s best to address it sooner than later as lenders tend to be less forgiving if the account is badly in arrears before you call.
- Contact us as soon as you perceive a potential problem so we can offer some guidance.
- Is there another way of purchasing a home if deposits are not readily available.
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Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today.!
