Yes, shelter is a basic human need. We all need a lovely and decent place to live, right? Well, buying a home is a long-term commitment. Like all long-term investments, it should be thoroughly examined. First, start by determining what kind of buyer you are. With this, you can steer through the complexities of the mortgage world to find the best financial solutions for your needs. Here’s what you need to consider before getting a home loan.
What Type of Buyer Are You?
- The First-Time Homebuyer
Are you buying property for the first time? Then this is your category. As a first-time buyer, you must be pre-approved for a loan. But Why? To determine the amount of loan that you can potentially afford. Remember, other than monthly mortgage payments, there are other costs associated with buying a home.
- Owner Occupied Vs Investment Property
Do you know the property usage determines the loan terms? Yes, the lender wants to know whether you’ll reside in the property or you’ll rent out. The interest payable may be lower if the property is your primary residence.
- Builder or Renovator
Are you building a new home, or renovating your old house? In this case, go for a construction loan for financial solutions. Here, the lender will only release the money after you’ve achieved certain milestones in the property building process.
Construction loans are interest-only loans that are transferred to a home loan when the construction process is complete. It is primarily designed for people building their homes from scratch. However, some lenders may offer them to renovators as well.
What Type of Interest Rate Do You Want?
- Variable Vs Fixed Interest Rate
Will you choose a fixed or varied interest rate? Well, this is dependent on how you manage your finances. For instance, in a fixed home loan, the interest is set for a certain amount of time between one to 15 years. With the fixed interest rate, you’re able to know the amount to pay at the end of the month.
However, the variable interest rate changes throughout your loan. Well, with this, you may pay a lower amount of money at the end of the payment. But that’s not guaranteed as paying a higher amount is also a probability.
- The Split Rate Home Loans
It allows borrowers to reap the benefits of fixed and variable interest rates. How does it work?
Well, the borrower fixes a portion of their loan and leaves the remainder at a varied rate. It is a good option for borrowers who want predictability and peace of mind regarding loan repayment.
In most cases, the split mortgage loans come with a 70:30, 60:40, or 50:50 split between the fixed and variable interest rates. Here, the borrower determines the amount to risk depending on their risk appetite.
So, you have decided to buy a house? You’ve also looked at different houses in the vicinity? The question is, where do you begin? And how do you apply for and get a loan? Well, follow the outline above on what you can expect in your home-hunting process.