Living the Life: How to Have Your Dream House through a Home Loan
Buying a home for your family is one of the biggest financial decisions you’ll ever make in your lifetime. Filing for a home loan application is the first step to get financial help in order to buy a house. However, before going to lenders, there are some things one needs to consider in order to make the right decision and to find the best deal.
Understanding How Home Loans Work
A standard home loan follows a certain system. First, you need to save a deposit for the amount you need to borrow. Next, upon getting approved by a lender, you can begin looking for a property within a set budget, after which, the loan will be finalised once the loan amount has been determined. Lastly, in order to pay lower interests and avoid falling behind on payments, the property is offered as security.
Amount of Deposit Needed
Determining how much you actually need in terms of deposit is another crucial step before getting a home loan. By logic, the larger your deposit is, the less money you need to borrow and the less you need to pay it back later. Ideally, anyone who wishes to get a home loan needs at least 20 percent of the value of a prospect property. By saving up at least 20 percent, you get better chances for being approved by lenders.
Comparing Loan Amounts
The best way to determine if you can afford a house is to carefully figure out how much you are willing to borrow and whether you can pay for it afterwards. The most ideal way to go about this is by comparing home loans. You can ask the lenders to provide you more information on affordable home loan rates, repayment amounts, and other features.
Types of Home Loans
Another thing to consider is what type of home loan is ideal for you. After all, you can’t just blindly walk into a deal without knowing what is in store for you. There are two loan types to choose from: the standard or principal and interest loan or the split or partially fixed loan. Each type of home loan works differently from each other so it is best to take your time to weigh these two options.
The standard loan setup lets you make regular payments to cover both the initial amount borrowed as well as the interest. The main advantage of this is that as you continue to pay off the principal amount, your balance also decreases. On the other hand, the split loan allows you to pay a fixed interest for a portion of the loan. The remainder will be paid on a variable rate.
(Source: Choosing a home loan, Australian Securities and Investments Commission)