Home loan affordability
If you’re a regular reader of the Reventon blog, you will likely be aware that home loans are expected to be more accessible to more property purchasers as we enter 2020, thanks to a loosening of lending criteria and a lowering of interest rates by many of the big lenders. So, if you’re in the group considering taking the plunge and investing in property, it’s important to ensure you can afford your home loan. Here’s our handy guide.
Consider the most suitable home loan
There’s a lot to consider before taking out a home loan, particularly if you’re buying a property for the first time. Some key elements to keep in mind are:
- loan type – if you’re going to rent your property to tenants, you’ll need a different loan type to a typical owner-occupier loan
- loan term – the longer your loan term, the lower your monthly payments will be, but it’s a fine balance with your overall interest payments
- interest rate – the lower the better! You’ll need to shop around for the best deal possible, but keep an eye on hidden rates and arrangement fees
- principal or interest-only – some people opt to pay only their interest to keep their repayments low, but this won’t be paying off the balance of the property.
This is just a quick overview of some key factors of home loan repayments. If you’re considering taking out a mortgage, check out our guide on your home loan repayments or get in touch with one of our advisers to talk through your options.
How much can you afford to borrow?
When we ask this question, we are not talking about what you could borrow – that’s the maximum the bank will lend you, which is often the figure people keep in mind when they are first considering property investment. Instead, we’re talking about what you should borrow – this takes into consideration your future as well as your current finances. By borrowing conservatively, you can ensure your loan is future-proofed against any unforeseen circumstances in the future. If your interest rates go up, if your property isn’t tenanted for a full 52 weeks of the year, or if your employment or relationship status changes, you can afford it.
Calculate your repayments
It’s important to know the details when it comes to your home loan affordability questions. Consider cutting straight to the figures using our repayment calculator – it can tell you exactly how much you will be spending on your home loan, depending on the terms you choose for your loan (so this step is best taken once you’ve done a little initial research). You can use sliders to adjust any of the figures and gain real-time updates on how this will impact your regular repayments and total loan spending. To benefit from this essential planning tool, visit the loan repayment calculator now.
Getting approved for your home loan
Considering the amount you’d like to borrow and shopping around for a product that suits you is only part of the process. You also need to get your financial affairs in order to maximise your chances of getting approved for a home loan. It’s not as daunting as it sounds. There are some simple steps you can take, such as ensuring your credit history is squeaky clean, that you have regular income, and that you are on-time with other bill payments such as rent as utility. If you can prove to your lender that you are a reliable person financially, you’re much more likely to get your application over the line.
Get home loan advice
Whether you’re looking for your first loan, you’re refinancing, or you just want to know your options, it pays to get advice from professionals. With support, you can be confident that you are making the right decision for your financial future – and you could potentially be saving yourself thousands in the long run.
Reventon’s leadership team have over 125 years of collective experience, and we’ve got in-depth knowledge of the current home loan market. So if you’re looking to pay of your home loan more quickly, get in touch with one of our friendly team members to book your free consultation.