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Regardless of whether you’re an admin or an astronaut, purchasing your first home is an enormous step that can be both emotionally and financially draining. It signals the start of a new chapter in life, usually supported by a major life-changing event, such as marriage or even receiving a promotion at work that elevates you into a higher tax bracket.
Realistically, most people simply cannot afford paying the full price of a house in one go. Who can suddenly conjure hundreds of thousands of dollars, place them in a suitcase, and hand it over to the seller?
That’s why home finance exists, allowing you to purchase a home and pay off the price through monthly repayments.
Where can I get a Home Loan?
You can acquire a home loan through a bank, credit union or a financial institution, such as Newcastle Permanent. Buying a home is always a significant task so you will receive guidance from the retinue of experienced consultants at these establishments.
Now that you’ve located a home loan provider, the next step is to assess your eligibility for home finance.
Before you begin, it’s vital to budget wisely so you have enough to afford the home loan repayments. Be sure to add up all your costs, including money for petrol, eating out, gym membership to figure out how much you could potentially save.
There’s also the emotional aspect because you need to mentally prepare for the responsibility of being a property owner. In addition to making repayments, you are in control of an asset –the value of which can soar upwards as time goes by.
Home Loan Requirements
To cap off the procedure, there is always a provision of 5 – 10% of the purchase price as a deposit. Naturally, the higher the deposit, the greater the buying power.
To improve your chances, it’s optimal to have a steady source of income. This will demonstrate to the home loan provider that you are financially capable of fulfilling the repayments.
How It Works
So how exactly does a home loan operate? More importantly, what do these monthly repayments consist of?
Principal and interest form the ingredients of a home loan. The principal is the amount that is borrowed and the interest is what you pay for the home loan. At the beginning, you pay off the interest mainly, with a small percentage going towards the principal. As time progresses, the interest decreases as the principal is gradually chipped away.