At Preston Finance and Insurance, we understand that buying a property can be overwhelming at times. That’s why we take pride in helping people to find the best home loan at the lowest interest rate available. As mortgage brokers in Cairns, we have the pleasure of meeting a lot of different people from all walks of life. From first home buyers, to people looking to invest, we've met them all. As of late, we have noticed the same questions popping up during enquiries.... so we thought we’d address these common questions.
1. How much money do I need as a deposit to buy a home?
This is a difficult question to answer as it really depends on the lender that you choose. As a general rule, you need a deposit of 20% of the purchase price of the property you wish to buy. Most lenders will allow you to just pay 5% deposit, however the downside is that you will have to pay LMI (lenders mortgage insurance). When it comes to applying for a home loan, the more deposit you have the better. With a 20% deposit, you don't need to pay LMI and you will have access to better home loan options and interest rates.
2. What constitutes genuine savings?
Genuine savings is a term used by lenders to describe funds that a home loan applicant has saved themselves over time. Some lenders will not approve a loan unless the applicant’s deposit is considered genuine savings! So what exactly constitutes genuine savings?? Lenders look for consistent additions to savings over a period of at least 3 months to a year or more. This means that things such as casino winnings, inheritance or a cash gift are NOT considered genuine savings.
3. Does my credit card effect my loan borrowing capacity even if I pay it off every month?
The simple answer to this question is 'YES', your credit card will affect your loan borrowing capacity. Your credit card is seen as a liability by lenders. Most Home loan lenders don't really base their assessment on your credit card balance. Even if you make regular monthly repayments on your credit card, or you have very little debt left on your card, it is still considered a liability. If you have a credit card, it is best to reduce your credit card limit so that it is as low as possible. This will generally improve your loan borrowing capacity.
4. What are the other costs that I will have to pay outside the borrowing costs when buying a home?
When you are buying a house, keep in mind that it isn't just about paying the price tag that’s on the property. There are some additional costs involved that vary from state to state. Besides the purchase price of the property, you will need to pay for stamp duty which is usually the biggest cost and will vary depending on the house price and the state that you are in. Other costs may include conveyancing and legal fee's, pest and building inspections, mortgage registration and transfer fees, loan application or establishment fee's, council rates and Lender’s mortgage insurance. Mortgage insurance is only applicable if you have a deposit less than 20% of the purchase price.
If you have any additional questions or would like any more information, please contact us at Preston Finance and Insurance. We can take the stress out of purchasing a property by finding you the best home loan at the lowest interest rate. Contact us today:
1/15 Spence St
07 4052 0750