Home loan terms typically last up to 30 years, which is a considerable amount of time when you think about it. It is most likely the biggest financial decision you will make, which is why you need to ask yourself a number of important questions first before you jump in. These include:
1. How much can you afford to pay per month?
Before anything else, ask yourself this. Figuring out how much you can afford will determine the type and size of loan that you take out instead of the other way around. To get an idea of what you can afford, firstly determine how much money is coming in every month and then subtract your expenses, including car repayments, groceries etc. The remaining amount will ideally be the amount you can afford, plus some savings.
2. Do you prefer a short or a long-term loan?
This question helps you decide the type of loan that may be right for you. If you prefer a short-term loan, then you must also be prepared to make higher monthly repayments. Otherwise, a long-term loan will allow you to make lower repayments that may be gentler on your budget to meet your long term goals.
3. What do you plan to do with the property?
There are a variety of loans in the market, each of which are typically designed for a particular type of buyer. So, it’s also important that you ask yourself what you’re planning to do with the property. If you’re buying your first home, then you may be able to take advantage of deals geared towards first time buyers, and it may be ideal for you to take out a long-term loan, especially if you plan on living there for at least the next 5-10 years.
Meanwhile, there are also other types of loans suited towards people who may want extra cash to use towards renovating and also investor loans for those who plan to lease their property within 12 months of owning it. Your Launch Finance mortgage broker will be of great help to you in deciding which loan is most suitable, based on what you plan to do with the property.
4. Where do you see yourself in 5 years?
When taking out a loan, don’t just look at the short-term benefits, such as honeymoon periods where interest rates are initially lower. It is best to look at the bigger picture and review the loan as whole. In that same light, also ask yourself where you see yourself going in the coming 5, 10, and 15 years. It will enable you to choose a loan that’s flexible enough and provides you with the features that you think will still be important to you several years down the road.
Choosing the right loan can be confusing. There are many factors to consider, such as the inclusions, the term, and the fees involved. The process can be made easy with the help of a mortgage broker. I will ask the right questions to ensure you find the most suitable loan that works with you and your lifestyle, making repayments easy. Call me on (08) 9367 4222 to book your appointment.
Written by Duncan Pearce.