sjsmith.com.au - blog

Property Finance

Last week I started talking about how to take the first steps to buy a property. This week I want to talk a little more about the finances needed.

Once you've started to get a good understanding of your market you need to think about getting your deposit together.  How much you need depends on how much you're going to spend.  Are you self employed?  You'll need a bigger deposit.  

Banks have recently tightened up their lending but as a general rule you will need 20% of the purchase price.  You may be able to use a smaller deposit of at least 10% if you take out mortgage insurance.  Don't forget to plan for stamp duty, legal fees, bank fees and any government charges (these vary from state to state).  Most of the large banks have pages where you can trial the financials of your purchase.

Before you speak to the bank you'll also want to gather details of what your income and outgoings are.  Do you have any current debt like credit cards or car repayments?  How much are you planning on using for a deposit and is this money already available?  Details of your current superannuation may also be needed.

While it's worth speaking to your own bank even before you're ready to buy I wouldn't automatically sign up with them for a mortgage.  Shop around.  Check what other lenders are offering.  What are the interest rates (especially the comparison rates),  are there establishment fees and, what are the ongoing fees.  Check online sites for alternative lenders.  Does your superannuation have a mortgage arm?  If you find an alternative lender who you like, check the reviews of their customers.  Are they everything they claim to be?  You could also use a mortgage broker. A broker will have a number of lenders (but not all)  for you to choose from.  Using a mortgage broker doesn't cost you anything - their fees come from the lenders whose products they provide.  

Beware of lenders who offer a lot of bells and whistles with the mortgage like credit cards, offset accounts etc.  Your primary goal is to find the lowest comparison rate over the term you want.

Don't be afraid to get details from a few lenders.  If you find a good deal you may want to go back to your own bank and see if they will better it.  They won't volunteer this, you'll have to ask.

On that note, happy property hunting and happy mortgage hunting.  

Till next time,

Sarah-Jane X