Planning before you get a mortgage

Make your home purchasing process easier by follow these suggestions.

06:52 10 September 2013

One of the best financial achievements in a person’s lifetime is the purchase of a first home. It symbolises freedom as well as financial success. Mortgages are the means by which the majority of people acquire their homes. For some people obtaining a mortgage might be a breeze, while for others the process takes longer and involves much more work. Here are a few basic tips to help you with your pre-home planning:

• Research—the process of finding the right home involves quite a bit of research, as does the process of selecting the right lender to provide you with a mortgage. There are many things to consider with a mortgage so leaving ample time to do research is imperative to finding a good deal.

 

• Credit—find out what your credit rating is so you know what to expect. A lower credit rating means you will most likely receive a higher interest rate and higher monthly payments. It could even mean you won’t be able to qualify for a mortgage until you have worked to improve your credit rating.

 

• Initial payment—begin saving money for an initial payment on a mortgage. The more you are able to put toward the purchase price, the better your monthly payment will be and typically the better your interest rate will be. Putting money toward the purchase price lowers the bank’s risk in lending to you.

 

• Mortgage types—there are a variety of mortgage types and the significant differences are usually about the repayment plan. Some mortgages require you to pay interest only and then the rest of what is owed at the end of the agreed term, while other mortgages may put payments toward principle and interest.

 

• Options—lastly, familiarise yourself with your options if anything goes wrong and you can’t make your normal payments so your investment is protected.