You can save thousands of dollars whether you're a first home buyer, investor, or you're refinancing, by making the right choice of mortgage. Brisbane has a competitive range of flexible products and sometimes the choices can be overwhelming! It's very important to make sure you know what you're doing before you apply for any loan. This article will assist you by providing a handy checklist of points to consider.
1. Make sure you have your mortgage arrangements in place before you put an offer in on a property. What you need is a pre-approval, and most financial institutions can help you with this, usually to a pre-set amount based on your equity and capacity to repay.
This is useful because you can inspect potential properties more confidently, and buyers will be more open to your offer if you can show them that you have pre-approved finance.
2. Know your terminology. Here are several important ones for your Brisbane mortgage:
- Loan To Value Ratio (LVR): This is simply the amount of the loan divided by the value of the property you are buying or re-financing, turned into a percentage. So if the property is worth $500,000 and you are borrowing $400,000, your LVR is 400,000 / 500,000 = 0.80, or 80%. . Typically a lender can go to an LVR of 80%, but under certain circumstances can increase this to 90% or sometimes higher. The higher the LVR, the bigger the potential risk to the lender, and thus the higher the costs you can expect to pay.
- Serviceability. This is your ability to meet the monthly or fortnightly payments required for the loan. Your serviceability will be determined by your income, minus your expenses.
- Equity. This is value that you have in assets minus any debt against those assets. IN the above example, the real estate value is $500,000, and the debt is $400,000 so excluding other costs, the equity is $100,000.
3. Beware of the “Hidden" costs. Any loan has administrative and other costs associated with getting into it and also getting out of it! It is wise to carefully consider these before you sign anything. Some important costs associated with real estate / Brisbane mortgages are:
Costs going in: - mortgage stamp duty - setup fee - search fees - valuation fees - legal fees (for the finance, not the property!) - brokerage fees - often these are not paid by you, but the lender, but not always.
Costs getting out: - “Break penalty fees" These can be quote considerable - legal fees - administration fees - search fees
4. Interest rate isn't the only thing to consider… This, and more important “Mortgage Brisbane" tips continued, see below:
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