Things to consider before applying for a home loan

Make an informed decision by considering these things before you borrow.

1. Your budget

Take a close look at your current financial situation. Calculate your income, expenses, and savings. It's vital to be crystal clear about how much you can comfortably afford to borrow.

2. Savings for a deposit

In Australia, most lenders require a deposit, which is typically around 20% of the property's purchase price. While there are some options with lower deposits, having a more substantial down payment often means better loan terms.

3. Credit history

Your credit history plays a significant role in your home loan application. Lenders will assess your credit score to determine your creditworthiness. If you have a low score, consider improving it before applying for a loan.
4. Interest rates

Interest rates can fluctuate, so be sure to research the current rates and understand how they might affect your loan repayments. You can choose between fixed rates for stability or variable rates that may change over time.

5. Loan type

Explore the various home loan options available, such as fixed-rate, variable-rate, or split loans. Each type has its pros and cons, so it's crucial to choose one that aligns with your financial goals.

6. Loan features

Different loans come with various features, such as offset accounts or redraw facilities. These features can affect how you manage your loan and make repayments, so choose wisely.

7. Loan term

The length of your loan term can influence the amount you pay each month. A shorter term means higher monthly payments but less interest in the long run, while a longer term results in lower monthly payments but more interest.

8. Fees and charges

There can be various fees associated with your loan, such as establishment fees or ongoing fees. Be sure to understand all the costs involved and how they might impact your loan.

9. Future financial goals

Consider your long-term financial goals. How does buying a home fit into your broader plans? It's important to ensure your home loan aligns with your overall financial strategy.

10. Professional advice

Finally, don't hesitate to seek advice from an expert, such as a mortgage broker. They can provide invaluable insights and help you navigate the complex world of home loans.