It’s a good idea to make sure you have got your ‘house’ in order before you consider purchasing a property.
You should ensure you have your home loan sorted out before shopping around or you may finish up disappointed when the lender fails to approve your loan application. You should know your borrowing capacity and therefore your purchasing capacity before looking for properties to purchase.
Here are factors to consider before entering the property market (or even starting to look for a property):
- Know your borrowing capacity and your budget. It’s important to know what your borrowing capacity is before you begin shopping for property. You need to be comfortable that if a lender would be willing to lend you an amount of money then you are comfortable with the ongoing repayments.
- Your borrowing capacity can change. Factors such as your income, the number of dependants in your family, your commitments (loans, credit cards, etc.) and current interest rates can all affect your borrowing capacity. Higher interest rates mean you can borrow less while lower interest rates mean you can borrow more. More household expenses (including loan commitments) mean less surplus available to borrow more money. You need a good relationship with your broker so you can discuss what could affect your borrowing capacity.
- Do you have your contribution available when you are purchasing? It’s important to know that a lender wants to see evidence of your contribution to the purchase at the time of loan application (lenders won’t accept that you are going to save money in the future, they want to see it now!) And if you intend purchasing at auction, the real estate agent wants to receive the deposit on the day you are the successful bidder.
- What if circumstances change? It’s OK to consider what your circumstances are now and how much a lender will offer you but what if changes happen? (Or more to the point, how can you cope when changes do happen?) When you know what current repayments will be, start asking questions like what if interest rates rise, what if how household goes from two incomes to one and what happens if we have another mouth to feed. Changes are going to happen so you need to plan for them now.
- Are you considering non-standard property? Not all lenders lend for all properties or to the same level so if you are considering purchasing anything like a small apartment (<50m2), a studio apartment, a converted warehouse, student accommodation, etc. or anything that does not resemble a 2 or 3 bedroom house or unit in the suburbs, check before proceeding.
- What is your plan? Are you considering changing your lifestyle after purchasing? Are you going to go with the lender’s 30 year plan or are you going to pay the loan off in 5? Principle & Interest or Interest Only? Fixed or Variable?
Have you realised it’s a good idea to have a good broker working for you? For more information, contact Peter Ruddock on (03) 9877 6471 or firstname.lastname@example.org