Whether you're on the last leg of your mortgage or are just starting your property search, here are some top tips you can use during the life of your loan.
Home loans are rarely easy to pay off, so at every stage of your loan's life you could stand to hear a few tips that could help you save money or just make your loan a little less complicated. The team at finder.com.au has put together our definitive top tips for home loans that are all designed to make your life easier with your loan.
Top tips for first home buyers
- Budget, budget, budget. It's important to find a property you love, but don't get carried away and settle on a property you can't afford. You need to plan out a workable budget and stick to it. Knowing how much you can afford each week is key to planning your repayments and finding a property in your price range.
- Live in the moment. Buy a property you can afford now, not what you think you will be able to afford later. To be eligible for the First Home Owner's Grant you only need to occupy the property for a year, giving you plenty of time to upgrade should your circumstances change.
- Think big. Take some time and save the biggest deposit you can. This shows the lender how financially able you are and the bigger deposit you have the more equity you have in your property from the start, meaning less interest. You will also avoid Lender's Mortgage Insurance if you have a deposit of 20% of the loan amount or more.
- The early bird gets the loan. Apply for your First Home Owner's Grant as early as possible, the best time being when you apply for your home loan. You can lodge your application through most lenders and if they are an authorised agent you will be able to receive it through them. This way is quicker than sending your application to your State or Territory Revenue office.
- Get rid of your excess baggage. You may want to get into your first home as soon as possible, but reconsider applying if you have a lot of debt. Try and consolidate any existing debt you have on your credit cards, car payments or other loans and pay it off before you apply for a loan. Your home loan needs to be your top priority and debt can seriously weigh you down.
- Be smart. Don't be fooled by the lender or real estate agent's jargon. Remember, you are a customer and they are looking to make money off you, so be sure you be a savvy shopper. Don't believe everything you are told and do thorough research by comparing loans and properties online. You can start by comparing first home buyer loans below.
Compare loans for first home buyers
Top tips for negotiating
- Know what you can afford. Work out your budget, know how much you can afford and don't settle on a loan or property that isn't in line with the number in your head.
- Put on your poker face. Once you decide on your budget, don't let a real estate agent know your maximum price. A good way to keep this number under wraps is by decreasing it and telling them the reduced number. Also, when looking at properties, don't let them know if you fall in love with it. If anything, point out a few flaws that might be a case to bring the price down.
- Do your research. When it comes to buying a property or settling on a home loan, it pays to have done your homework. Finding out as much as you can about what you're negotiating for could give you the upper hand and result in some serious savings.
- Go in low. When you're negotiating for real estate, don't be afraid to play hardball. Even though your lower offer might be rejected, it still might help towards establishing your position and may help reduce the price. The industry standard is to knock off between 10-20% of the asking price when making a counteroffer.
- Don't be bullied. In real estate, you and the seller both want the best price, but it is a negotiation and you should feel free to negotiate. Don't believe everything the seller says about other people putting in offers or not being able to reduce the price and stand your ground.
Top tips on how to get approved for a home loan when you don't meet the criteria
- Know your options. Whether you're self-employed, have bad credit or don't earn a regular income, you should compare your options to see what's available. You should take a look at the eligibility criteria set by different lenders to see what loans you may be able to get. Compare rates and fees for these loans because they tend to be higher than regular loans.
- Go low doc. If you are self-employed or do not earn a regular income you may be eligible to apply for a low doc home loan, which is where a lender requires less financial documentation that other full doc home loans require. These loans are also a good option for people have their assets tied up in investments and therefore find it difficult to prove an income.
- Work within your limits. If you have bad credit and would still like to get a home loan, there are some lenders who offer bad credit home loans. Non-conforming home loans can accommodate people who have been previously declared bankrupt or have negative marks on their credit file.
Comparison of Low Doc Home Loans
Top tips on how to make your mortgage repayments and pay your loan back sooner
- Focus on your savings. It's tempting to put all of your savings towards your mortgage by making extra repayments, but it's important to keep some of it as savings. This way you are safeguarding yourself if you become unable to make your repayments. A good option is an offset account, which will allow you to reduce the interest off your mortgage as well as give you complete access to that money.
- Keep talking. If you are having a loan-related problem, you should alert your lender immediately. Keeping them in the dark will make them untrustworthy of you and unlikely to go the extra mile to help you out. The last thing lenders want to do is for you to default on your loan and as such they might be the best people to give you assistance.
- Change it up. If you are having problems making your repayments or know you will be under financial stress for a short while, see if your lender will allow you to make "interest-only" repayments or even take a repayment holiday. These options are there to help you out in times of need, so if you need them, take advantage of them.
Top tips for switching home loans and lenders
- Consider the costs. If you are looking for a better deal, make sure you take into account all of the extra costs that come with refinancing. These include break costs and other fees which can seriously damper the value you may get from switching your loan.
- Weigh up your options. The best way to determine the value of switching your home loan or lender is by comparing your options online and calculating your savings. You should look at all of the features available, such as offset accounts, redraw facilities or rate discounts and see what you'd like your new loan to have. Then decide how much you're willing to pay for it.
- Keep forward thinking. Because the costs of refinancing may be considerable, make sure you consider the type of loan you want now and the type of loan you want later in life so you don't need to switch again.
Compare loans for refinancing
Your home loan will be with you for a long time, so it’s never too early or late to put these tips into action. By comparing your mortgage options online and being aware of the benefits offered by lenders, you can work towards managing your repayments and maybe even paying off your home loan sooner than you expected.