Getting a Home Loan
Getting a home loan can be a time consuming and stressful experience especially if you are a first home buyer.
At Edge Mortgages, we're here to take the stress out of this experience by helping make it as easy as possible. We'll step you through the process, so you'll know what to expect and what information you will need to gather.
How much will you be able to borrow?
First up, and if you are like most people, one of the biggest questions will be about how much you will be able to borrow.
This is down to your income and your commitments. The banks will decide how much they will lend to you based on your total income against your total outgoings. The interest rates that are applicable at the time will be also be taken into account when deciding how much you will be able to borrow. But every bank has different lending criteria. This means that one bank may lend you a lot more that another on exactly the same day, given exactly the same circumstances.
Restrictions on loans for people who don't have a 20% deposit recently become an additional challenge for first home buyers.
This is where a mortgage broker can help, by working through all the different options available to make sure you get that dream home and the best deal.
And the good news is, if you've been turned down for a loan by your bank (even if you have been a customer of theirs for a for a long time) it doesn't mean that you won't be able to get a loan from anyone else.
What home loan will suit you?
There are different mortgage structures that can allow you to pay your mortgage off sooner, or provide you with some certainty about your payments.
Should you fix your mortgage interest rate for a certain length of time or have some of it on a floating interest rate? Which should you chose? What about repayment options?
The key to all this is to get an independent, expert overview of your options so you get the best deal given your individual circumstances.
At Edge Mortgages we know a number of different lender's calculators, criteria and options. We can let you know, in one quick phone conversation, much you can afford to borrow, so just give us a call.
What size Mortgage can I Afford?
No matter what anyone says properties are still expensive to buy and, unless you are fortunate enough not to have to borrow to afford one, this is a question most of us will ask ourselves.
There are two answers to the question. Firstly, how much the bank says you can afford and secondly how much do you feel comfortable borrowing.
How do Banks measure Affordability?
As lenders do not want to their borrowers failing to meet loan payments they take a reasonable conservative approach to calculating how much you can afford to borrow.
- Each bank has differing calculators meaning you can borrow more with some than others at any given time. We have access to all of their calculators and the results between them often differ greatly.
- In general they index calculations against the prevailing interest rates and add a margin on top to stress-test your income in light of potential upward move nets in rates.
- They will only measure a portion of your core income to apply it against mortgage payments. This is to ensure you have the larger share of your income for other living expenses
- Any debt repayments remaining outside of the lender will have a margin added on top
- They will only take between 75 & 80% of rental income into consideration to allow for any vacancies
- No matter how frugally you live the bank's all have statistical measures about how much it costs for a person, couple & children to live each month and apply these
These are all applied to the calculations so the figure the bank will come up with is one that should be relatively affordable – however this only applies to how much they will lend you and won't take into account additional or unplanned expenses that you may incur such as:
- Support of extended family members
- High cost sports activities
- Medical expenses
- Lifestyle choices involving entertainment, travel and other purchases
- Changes to income levels
- Starting a family
The final test needs to be how comfortable you feel about the repayments. Remember, the bank only approves lending based on a snap-shot in time – only you know if your plans include changes such as starting a family, spending a lot on an overseas trip or taking time off work.
Make sure the amount you are borrowing meets requirements of the bank and that you are comfortable with it.