13 Mar 2024Buying a home is a monumental step in one's life, a decision that intertwines the heart's longings with the mind's practicalities. For the uninitiated and seasoned homebuyers alike, financial preparedness stands central to realizing the dream of owning a home.
Navigating the financial labyrinth of real estate can be daunting, fraught with questions and calculations that demand attention with unwavering precision. To simplify this critical aspect of homebuying, consider this checklist that outlines six pivotal steps to sorting out your finances.
1. Deposit Dilemma: Decoding the 20%
Most prospective homebuyers are well-acquainted with the concept of a deposit—the initial chunk of money they'll need to secure their dream property. Traditionally, a 20% deposit has been the golden standard, a requirement that not only serves as a proof of financial capacity but also influences mortgage rates and insurers' interest.
However, it's crucial to note that the 20% rule is not set in stone. Certain lenders may allow borrowing up to 90% of the property value, albeit with additional costs like Lender's Mortgage Insurance (LMI). For those needing to borrow more than 80%, consulting a mortgage advisor becomes imperative. Harcourts and partner Mortgage Express can provide tailored advice and streamline the labyrinth of loan options.
2. Budget: Crafting Your Financial Blueprint
Drafting a budget is akin to crafting a blueprint for your financial stability. It should encapsulate an exhaustive list of monthly expenses, from the mundane grocery bill to the not-so-ordinary car servicing. However, the budget must expand its reach to encompass the idiosyncrasies of home ownership, including but not limited to, annual insurances, property taxes, and potential maintenance.
An astutely drafted budget not only serves as an assurance of financial prudence but is also an insightful tool to gauge affordability.
3. Mortgage Calculator: Crunching Numbers Realistically
Armed with your meticulously crafted budget, it's time to confront the facts with a mortgage calculator. If the thought of complex financial equations is daunting, reach out to Mortgage Express who can provide user-friendly tools to ease the process.
The calculated mortgage repayments might seem a formidable figure, possibly exceeding your current rent payments. Yet, they signify a different essence—as mortgage payments, they contribute to an appreciating asset and, in a sense, are investments in the self.
4. Pre-Approved Finance: Ascertain Your Loan Horizon
Finance pre-approval from lenders is the milestone that demarcates the horizon of your home loan hunt. With a written pre-approval in hand, you are empowered to scour the market for homes within your validated price range. Engaging with lenders to secure this milestone is a process that demands transparency regarding your financial state—income, savings, debts, and spending habits.
For the homebuyer, pre-approved finance serves as a guardrail, keeping ambitions grounded in economic pragmatism. It enhances negotiating clout and expedites the process when you eventually find your perfect home.
5. Mortgage Advisers: Guides in the Labyrinth of Lenders
Mortgage advisers are akin to financial lighthouses—they illuminate the path through the labyrinth of lenders and their offerings. Leveraging their expertise and industry insights, mortgage advisers can unveil an array of financing options, customised to optimise your home purchase in the long run.
Engaging a mortgage advisor from Mortgage Express can furnish you with an array of deposit-securing options, ensuring you're leveraging every available resource.
6. Financing Your Home: Exploring Beyond the Obvious
Financing a home often transcends the boundaries of conventional savings. Supplementing your deposit with alternative income sources can significantly expand your purchasing power. First homeowners grant, shared ownership agreements, and help from guarantors or equity in existing properties can be pivotal in securing the finances required for home purchase.
These can enable a more significant down payment, reduce interest costs, and sometimes serve as a cushion against possible financial headwinds.
Disclaimer: This article does not constitute personalised financial advice. Nothing in this article is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this article