For most of us, buying a home is probably the biggest financial investment we will make in our lives, so it’s important to understand the financial commitment in both the short and long-term.

Plan Your Budget

You need to work out a budget and find out how much you have available each week to cover your mortgage repayments. Deduct all your regular expenses from your salary, and see what is available for saving for a deposit or for future home loan repayments. If you are presently paying rent, it is easy to allocate this amount to a mortgage payment, but a budget will also help identify other areas where savings can be made. You can also speak to a Satterley Estate Manager who can refer you to a finance broker who can help you start the budget process.

Applying for finance

Banks and other home loan lenders want to know that you will be able to repay the money they lend you. It’s your job to gather all the documents and proof to show the bank that you will be able to meet your repayments. Lenders want to see you demonstrate a strong employment history with a stable Income, low levels of debt – if you have high limits on your credit cards or loans reduce the debt owing, a regular savings history with regular deposits over three to six months and a good credit history where you have demonstrated successfully managing and repaying a loan.

Types of Home loans

Once the construction of your home is complete, you will need to decide what home loan is right for you. The different types of loans include; a fixed rate mortgage means your interest rate is locked in for an agreed period of your loan term with the option of 1-5 years. It also gives you peace of mind in case interest rates rise. Variable rate is a home loan product which has an interest rate which fluctuates up or down in accordance with market changes. A split loan allows you to borrow part of your mortgage on a fixed interest rate and the remainder on a variable interest rate – all under the one loan product.

Repayments

Your Required Monthly Repayment Amount (RMRA) is the minimum amount you must pay each month under your home loan contract, based on the loan balance and interest rate. You can choose to make your home loan repayments monthly, fortnightly or weekly however, if the loan is an interest only loan or construction loan that is not fully funded, repayments are made monthly. A principal and interest payment means your repayment is divided up into two portions. Some of your repayment is sent towards paying off the interest due on your outstanding loan amount, while the remainder goes towards paying off the outstanding loan amount itself. An interest-only loan means the loan principal is unchanged.

Disclaimer: The information contained on this page is general in nature and does not take into account your personal situation. You should consider if this is appropriate to your needs and where appropriate, seek professional advice.