Home loan

Here’s how to get a home loan and get out of the rental market

Owning our own home is a dream that most of us aspire to. The reality of living in a remote city with high cost of living and high rents makes this dream difficult or impossible for many people. How does one become a homeowner in Darwin and what are the key considerations when looking to move from renting to owning?

We walk you through the most relevant issues and things to consider when taking the plunge into home ownership.

Rental market
If you’ve been following or been in the rental market for a few years, you probably already know that rents are on the rise. Darwin’s suburbs are the best performers for the highest variation in rents, for both houses and units, with an annual increase of 23% to 30%.

Maria Mamouzellos,
Mortgage Broker – Yes Money

With vacancy rates at a multi-year low of less than 1%, most people are struggling to find a suitable property to move into. Competing with dozens of other applicants and most properties going over weekly budget amounts causes a lot of stress for most tenants.

If you are a tenant, did you have to move because your rent went up or did you just have to bear the increase because you no longer wanted to move? Long-term rentals are hard to come by unless you can afford the ongoing rent increases or you have a good landlord who hasn’t taken advantage of the current market and raised the rent.

How do you save money for a security deposit while paying someone else’s inflated rent? The short answer is either very slowly or not at all.

Increase in interest rates
As we all know by now, the low interest rates we have enjoyed for the past 10 years are going back. It sounds scary, but what is the reality when you consider the increase in mortgage repayments compared to the current and increasing rent?

The average home loan for a first-time home buyer under the current first-time homebuyer program is around $522,500. The recent increase in interest rates by 0.25 will increase monthly repayments by approximately $70 per month.

Another impact of rising interest rates is a decrease in the amount of money the bank will allow you to borrow. For example, for every 0.25 increase in interest rate, your maximum borrowing amount decreases by approximately $15,000.

Fixed rates are a good option to ensure your monthly repayment stays stable regardless of the current interest rate, but fixed rates are significantly higher than variable rates, so you’ll need to make sure you can commit to the highest refund amount. It’s also expensive to get out of the fixed rate before the end of the term, so make sure you’re not going to move, sell, or want to refinance.

Weekly repayments
Based on an average 3-bedroom house, you would expect to pay between $500 and $600 in weekly rent in Darwin.

Average monthly mortgage repayments based on an average loan amount of $522,500 and the current average interest rate (2.50%) are approximately $477.00 per week.

Difference of lenders
Not all lenders are equal, even if you are a long time customer of your current bank, they may not necessarily offer you the best home loan or give you more than one option. Banks have different appetites, target demographics, interest rates and different credit policy requirements. Although a bank may have a quick turnaround, their interest rates may be much higher than another lender. Some lenders are flexible, others won’t budge from their credit policy, no matter how long you’ve been their client.

If your current bank gives you excellent customer service but can’t offer you any options or doesn’t participate in national homeownership programs, you should consider using the services of a mortgage broker who can find the right fit. lender for you. Just because one lender says no doesn’t mean another won’t say yes!

Plus, it’s always better to have options than to fit into a lender’s policy. Don’t miss any potential grants or programs that will help you get into your own home as soon as possible.

Most important factors
Adequate income – you must be able to service the loan now and in the future taking into account a 3% interest rate increase (this is the buffer that the bank applies to the interest rate). ‘Evaluation)

Acceptable employment and work historythere – lenders will want to see that you have a solid work history to reassure them that you will be able to repay the loan over the long term.

Savings – you must be able to prove the amount of deposit/funds to complete the purchase when applying for a home loan. A consistent savings pattern is highly desirable by lenders, and most lenders require a minimum amount of genuine savings (saved over a minimum period of 3 months). That said, you have options with rental history and existing ownership to circumvent the actual savings requirement.

Spending habits – lenders will look at your spending habits to determine if you can afford to repay the loan. Most people don’t think about how they spend their money until they’re ready to start saving or apply for a home loan. The sooner you start a regular savings plan, the better.

red flags
Unacceptable income or employment – most lenders have a minimum amount of time you must be in your current job or be able to prove continuous employment. If you have just started a new casual job, most lenders will not accept your income until you have been in the job for at least 6 months. If you are self-employed, you must have 2 years of self-employed tax returns in order to apply for the maximum loan, otherwise you need a 20% down payment or your income will not be accepted at all.

Excessive or unusual spending habits – lenders require 3 month bank statements to be included with your application so they can get an overview of your spending habits. Things like gambling, buy now-pay later, declined payments due to lack of funds are transactions that the lender is concerned about because they indicate irresponsible behavior or living beyond your means.

Credit report problems are usually a cause of decline for the lender. A clear credit history is essential as it gives the lender confidence that you are not likely to default on your repayments.

Non-disclosure is the main culprit for a decline by the lender. It’s important that your bank manager or mortgage broker knows everything about you so they can help you resolve any issues before submitting a loan application.

Rewarding relationship and ability to apply
I cannot stress enough the importance of maintaining a good relationship with your mortgage broker or bank manager, as they can help you achieve your dream of owning your own home and keep your finances in good shape for the entire term of your loan.

Having a reliable and trustworthy CFO on call for any questions that arise will give you the support you need when things change for better or worse.

The Yes Money approach

Simply put, we mean business when it comes to getting loans approved. As construction finance specialists, we know what it takes to get the bank to say yes. We take the guesswork out of bringing together the land, construction and government grants to make your dreams a reality.

No messing around. No guesswork. Just simple and transparent solutions for ordinary people who just want to own their home.

https://www.yesmoney.com.au/

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