Home loans are tricky. Securing a mortgage can feel like navigating a minefield with all the paperwork and potential hang-ups. This is especially true after the global housing downturn a decade ago. Banks are far less accommodating with their customers and this often translates into a cold feeling for prospective buyers as they wait for a decision on their future. This doesn’t have to be you, however. Mortgage planning takes a lot of work, but with the patience to see it through you can secure a great rate and repayment terms without too much heartache or trouble.
Start your mortgage young.
Mortgages are all about the prospect of repayment. Banks want to lend their money – it’s how they drive profits – however, the practice of lending is an investment in people, and people are often more complicated than they seem. The economics of lending is fascinating, but suffice it to say, the more loans a bank can push out the more profitable and liquid the bank becomes; they want you to be able to take their money.
Ultimately though, your ability to secure a mortgage, or one at a competitive rate, hinges on the bank’s comfort with you as an investment, and most importantly with its calculation of your ability to consistently repay over the lifetime of the loan. This means you must start young while planning for that dream home you hope to buy someday. When you apply for your first credit card at 18-years-old, you must know that your spending and repayment habits starting at that time will produce ripple effects that help or hinder your mortgage applications in the future.
The average first-time homebuyer is now 34 in Australia, meaning there is likely considerable lead time for those planning for a strong financial future as first-time borrowers today. However, if you used credit loosely in your younger years, there are still solid strategies to build up your creditworthiness in the short term before seeking out your mortgage loan. Compare home loan products to start. Shopping around without a hard credit pull should be your first port of call – no matter your financial situation.
Build security while shopping around for the best deal.
While shopping around for a favorable interest rate, it’s important to keep paying down your current obligations. Taking out a loan requires a complex balancing act. You need to show regular savings as well as on-time payments on current debts. Making a considerable effort to save while also paying off old loans goes a long way to showing your creditworthiness to prospective lenders. It’s something that you should do no matter the circumstance but is of outsized importance in the months leading up to a major home-buying event. Building savings, either in stock and bond holdings or in liquid savings account at your primary bank will make for a stronger financial hold on the present as well.
Buying a home takes considerable patience. In order to close on the right home you have to search for properties that fit your needs and budget, and then you must work with a bank or alternative home loan provider in order to finance the deal. These things take time, but they always work out in the long run. Make sure you enjoy the journey through home buying and don’t let the stress get to you. Keeping calm and upbeat is crucial during this period, it can take days or weeks to finalize the financing and sale of a home, so stay the course and keep on with the tasks that occupy your daily routine during the wait. The worst thing you can do is to let it take over your thoughts, crippling your office or home productivity.
Buying a home is a rollercoaster experience. Don’t worry too much and prepare for its twists and turns in advance in order to make the process quick and painless.