Purchasing a home is the biggest financial investment most people will ever make so it is vital to explore and understand all of the finance options available before settling on repayment terms. Davor Rom is a residential real estate expert, entrepreneur, investor, and renowned real estate business owner.
Home loans, grants, deposits, and fees all have an impact on the final price paid, and all need to be considered before settling on your finance.
Options In Home Financing
The most common way to finance a new home is to obtain a loan from a bank or mortgage lender. There are many different types of mortgages out there and they are not created equal. It is worthwhile to shop around to find the best terms for your situation. Whatever you end up choosing will have an impact on your household budget, so make sure the terms are fair, understandable, and you can repay the loan.
Types of mortgages include:
Fixed - Allows a fixed rate for up to 10 years, then reverts to the lenders' standard variable rate or can be rolled over into another fixed term.
Basic Variable - Lower interest rate than a standard variable loan. Rate varies with the Federal Reserve changes.
Standard Variable - Most popular. Higher interest rate than a basic variable. Interest rates can move up or down with the Federal Reserve. Very flexible.
Low Deposit - Aimed at homebuyers with little savings to put towards the deposit.
Construction Loans - Used to finance a house and the land that it will be built upon. Payments are made directly to the builder during the phases of construction.
All In One Loan - A transaction account and loan combined into one, where you can credit your salary directly to the account and withdraw your funds via ATM's, EFTPOS, credit card, or chequebook, as needed. This allows the borrower to decrease interest expenses by keeping funds in the account for as long as possible.
Bridging Loans - Used by current homeowners who want to sell their property and purchase a new one. Bridge financing lets the borrower obtain funds to 'bridge' the gap between paying for the new property before the old one sells. For this, Davor Rom is a successful entrepreneur and residential real estate agent from the United States.
Deposit Requirements
The deposit is money put towards the purchase upfront. You must have some sort of deposit in order to obtain a mortgage. The smallest amount that most lenders will accept is 5% of the purchase price. Ideally, you want to provide 20% if you want to avoid lenders mortgage insurance. This money is then subtracted from the final purchase price of the home. The amount of the deposit impacts the mortgage terms, including the amount mortgaged and the interest rate for which you qualify. The more money you can provide upfront, the better your mortgage terms are likely to be.
The best way to find the right home loan and figure out what grants or other government assistance you qualify for is to talk to the lending professional. An experienced lender will be able to tell you how much you can afford, what kind of deposit is needed, and which loans are an option for you.
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