6 Things to Know Before Taking Out Your First Mortgage

mortgage broker sydney
June 29th

Buying a home can be a minefield. Many first-time homebuyers make a number of mistakes because there is simply too much information to process and too many important decisions to make. The following seven tips can serve as a beginner’s guide to property investing. Of course, it would be best t to reach out to a local mortgage broker in Sydney to get in-depth insights. But for now, these tips should help you get started on your path to a smooth home ownership journey.

1. Choose a property you can afford.

Purchasing a home is often the most expensive investment you will make in your lifetime, so it is critical to start off on the right foot. Consider properties that you can actually afford when purchasing your first home; this will help you pay off your mortgage faster and ensure you are not living above your means.

But living within your means does not also imply that you should choose the cheapest loans out there. Instead, look into properties that fit your lifestyle and income for the next years to come. Getting a cheap loan upfront might even cost you more in the long run.

2. Get a reasonable home loan.

When applying for a mortgage loan, it is critical to conduct extensive research and weigh the costs of how much you can actually borrow. Considering how much money you may be eligible for; it may be difficult to stay on track and within your budget. This will ensure that you can repay your debts on time and avoid financial insecurity in the future.

3. Save as much as you can for the deposit.

When saving for a down payment on your first home, it’s critical to have a good savings pool. However, it may be difficult to know where to begin. Here are a few ideas that can help you get started the right way.

Combined Income

First, add the combined income that you and your partner make each month (that is, if you are purchasing the property with a partner). This will help form your household budget and provide clarity on how much money you can work with each month. This sum must include:

  • Wage or salary payments
  • Return on share investments

Household expenses

The next step is to make a list of your household expenses. This list should include all monthly expenses such as rent, bills, payments, recreational activities, and any other relevant activities. When choosing a home loan, it is recommended that your repayments do not exceed 25% of your monthly take-home pay. This will ensure that you can pay off your mortgage comfortably and without undue stress while still living your desired lifestyle.

Track your spending

Tracking your spending can help you better understand your spending habits throughout the month. There are a number of excellent apps available, including Money Brilliant, Pocket Book, and Spendee, that consolidate all of your monthly expenses in one place. This gives you a better idea of where you can save money and where you can cut back, such as subscriptions, going out to eat, or purchases you may not need right now.

4. Know how much you are allowed to deposit.

There is a common misconception among buyers, believing that they need a 20% down payment for a mortgage. This is not always true. With Lenders Mortgage Insurance, you can make a smaller down payment (LMI). LMI is a one-time insurance premium paid by the borrower. This is used to protect the lender from any loss if the borrower is unable to pay their home loan.

LMI allows you to buy a better home that would otherwise take longer to save for. LMI can be paid in advance as a lump sum or added to your mortgage.

5. Consider what the home loan offers, not just the rates.

Before deciding on which Sydney mortgage loan to take out, it is critical to consider a few factors that will affect how much you pay back over time.

Variable vs Fixed Rate

A variable interest rate can change at any time and is frequently linked to Reserve Bank decisions on the national cash rate. This means that the amount of interest you pay back on your loan can fluctuate over the course of its life. A fixed interest rate means that it will not change during the fixed rate period. However, this may imply that you are missing out on a lower rate if variable rates fall.

Terms for your loan

When choosing a home loan, it is critical to consider the loan’s repayment terms. This can have a significant impact on how you pay for your mortgage. Simply put, the shorter the loan term, the higher the repayments will be for each scheduled payment, and the longer the term, the lower the repayments will be for each scheduled payment. Borrowers typically look to borrow for a period of 15-20 years, giving them plenty of time to pay off their mortgage.

Early repayments

Most buyers will look for ways to pay off their mortgage in lump sums. However, in order to retire the loan before its expected completion date, this feature must be enabled within their loan.

Repayment frequency

Buyers can choose how frequently they pay back their loan when selecting a home loan. Because each buyer’s circumstances are unique, it is best to select a schedule that you are most comfortable with. Payments can be made weekly, fortnightly, or monthly.

6. Consider the other costs associated with buying a new home.

When purchasing a new home, there are a number of costs that are frequently overlooked. These expenses include:

Stamp Duty

Stamp duty is a tax levied by each state and territory on real estate transactions. It is important to note that the amount of stamp duty varies by state and is determined by a number of factors. This includes the property’s value, whether the property will be your primary residence, and your own residency.

Transfer Fee

Transfer fees are paid when the buyer acquires ownership of the property. Depending on the property, this can range from a few hundred dollars to a few thousand dollars.

Mortgage Registration Fee

A mortgage registration fee is the amount paid by the buyer to register the mortgage in their name.

Legal/Conveyancing Fees

A conveyancer or solicitor is usually the best person to handle this step. This will ensure that you are protected by all legal aspects when purchasing a new home.

Mortgage Application Fees

In addition to repaying your loan, you will need to pay the loan application setup fees. Depending on the lender, this transaction fee may be waived.

Inspection Fees

Inspection fees are one of the most important and costly steps in purchasing a home, especially if the property is older. It is critical that you do not skip this step and that you select a reputable provider.

It is best to sit down with a credible mortgage broker in Sydney and take a moment to discuss all these in more detail. But if you don’t know where to start, that’s where we at Key Strategy Solutions can step in.

For more questions, be sure to reach out to Key Strategy Solutions today.

The list of things that you need to know before taking out your first mortgage goes on and on. The best solution would be to find people who can recommend steps that are specific to your unique situaiton. Need more help in finding the best mortgage broker in Sydney? Key Strategy Solutions can help you with that. Contact us.


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