How to properly budget and manage your home loan
Posted by : Premraj | Posted on : Thursday, October 30, 2014
Purchasing a property is a big undertaking. It is almost certainly the biggest purchase you will ever make. Hopefully, it will also prove to be one of the best investments you ever make too. In order to make your dream a reality, you will of course need a home loan from a mortgage lender. However, in order for the purchase to proceed smoothly, you will also need to consider a whole range of additional costs. This requires you to carefully construct a realistic budget, which if done properly will help the process immeasurably.
The best place to begin is to accurately work out what you can afford to pay on a new home. It sounds obvious, but this stage is too often overlooked. As a starting point, work out your actual monthly expenses such as food, utilities and transport. These are the sort of basics that a lender will likely not take into account when calculating a potential loan. It is important that you do the sums and measure it up against your take-home pay in order to provide a realistic picture of what you can afford on a monthly basis.
However, there are of course a whole host of hidden costs too when it comes to purchasing a home. For a start, you will need to find a surveyor in order to inspect the structural feasibility of the property. They may recommend that work needs to be done or that a pest inspector check the building. This is another potential cost that you likely hadn’t expected. Once you are satisfied with the property structurally, you will also need to pay a solicitor or conveyancer to oversee the contract. This will of course incur another fee. And then there are the taxes too. Most significant is the stamp duty or transfer duty on your property. Each state government provides an online calculator for this tax and it is worth noting that there is usually a discount for first-time buyers.
However, the major cost to budget for you is of course your home loan, whichever mortgage you choose in the end. If you’re not sure who to go with then use a site like Compare Home Loans to make it a bit easier. The good news is that if you have a broker to work out the most suitable loan for you, then the lender you eventually sign with is liable to pay their fee. However, using a broker does not mean that you don’t need to understand your mortgage – Far from it. In fact, it is imperative that you are comfortable with your loan. An interest-only loan can be a worthwhile option if you are looking to maximize the amount you can borrow. However, there are a bunch of different interest rate options to choose from, whatever type of mortgage you choose. A fixed interest mortgage ensures that the interest rate remains constant during a fixed period. A variable interest mortgage allows the rate to fluctuate and a split loan is a combination of the two. Make sure that you choose the most appropriate option for you. This is key to effectively managing the loan by accurately calculating your repayments. Just remember that once you make a decision, you will likely be locked into your mortgage terms for a significant period of time.
The final thing to remember is to factor in your moving costs before you take the plunge of a home loan. It is often overlooked, but can add up to a significant sum.