Guest Blog By Mortgage Choice Toowoomba
We are often asked by our buyers about how to start the process of getting finance to purchase their ideal property. This week we are sharing an industry perspective on this matter. Mortgage Choice Toowoomba has supplied us with a simple break down of the steps involved in getting a loan for that lot or house package that your heart desires.
Step 1 – Find out how much you can borrow.
This enables you to set a purchase price limit and know how much your repayments will be.
There are a lot of factors involved when working out how much you can borrow, such as your deposit, eligibility for any government grants or concessions, how much you can afford or want to repay each month and individual bank requirements.
Banks also take into account your financial commitments: including living expenses, your assets and debts, credit and employment history, as well as the type of loan.
It is crucial to know that each bank will assess your situation differently, meaning your maximum borrowing capacity will also vary between banks. This is why seeing a Mortgage Broker is a good idea. They have software which will quickly tell you which bank is the best for your situation.
Step 2 – Find out how much deposit you need.
Typically, a minimum of 10% of your home’s purchase price is required, (the First Home Owners Grant if eligible may count towards your deposit).
If you can save more, this will give you a wider choice of lenders and puts you in a better position to obtain a lower interest rate.
There are plenty of other reasons to aim for a bigger deposit. The bigger your deposit, the less you have to borrow, meaning lower monthly repayments and long-term interest charges, and to reduce your Lender’s Mortgage Insurance.
Find out how much you need to save weekly, fortnightly or monthly to achieve your savings target with our online savings calculator.
Step 3 – Know about Lender’s Mortgage Insurance (LMI)
LMI protects the lender (not you!), in the event that you cannot repay your mortgage. Most banks will insist you take out a LMI policy if your deposit is less than 20% of the property purchase price.
The greater your deposit, the smaller the one-off LMI premium will be. Most banks will let you capitalise the LMI premium (add it to your loan balance) but this will increase to your repayments and your long-term interest bill.
Step 4- Get expert loan advice
Banks can only advise you about their own products. A mortgage broker can advise you regarding products offered from a wide range of banks. One quick meeting with Mortgage Choice in Toowoomba can answer all of the above questions and find the loan that is right for you. You can find out more about us here – Mortgage Choice in Toowoomba and Darling Downs’ website.