Purchasing a house is undoubtedly a significant financial step in one’s life. It can be extremely intimidating to consider buying a property given the increasing cost of housing, interest, and lifestyle. If you’re a first-time home buyer, you may even be concerned about the possibility of a higher interest rate or other ownership-related issues.
It is always wise to speak with a mortgage broker in Perth, like FinanceCorp, if you have been planning to buy a house. In fact, mortgage brokers will help you get your first home owners loan and guide you through overcoming any financial challenges.
In this article, we will discuss a few issues that first-time homeowners may experience or the questions they have concerning mortgage home loans.
What are the potential risks for first-time home buyers?
- Borrowing capacity reduces concurrently with a rise in interest rates.
- Lenders determine how much you can afford to pay for your loan each month when interest rates rise, and then use that amount to determine the highest loan amount you can afford.
- Banks will be ready to give you less money overall since higher interest rates result in larger monthly loan repayments, so they don’t want to take the chance that your payments would increase to a level you can no longer afford.
How to Know Your Borrowing Capacity?
Your income, expenses, debts, and assets are considered when determining your borrowing capacity (things you own). When you apply for a loan, your borrowing capacity is determined, even though these variables may alter over time.
For many first-time homebuyers, having enough borrowing capacity is a major barrier, especially if they are the only one paying for the loan or on one income.
Can You Use Another Family Members or Parents to Help Increase Your Borrowing Capacity?
A “servicing guarantor” is someone who contributes to your mortgage with their income but isn’t named as an owner on the property’s title. However, with a servicing guarantor other than your spouse, your chances of receiving a loan or raising your borrowing capacity are low. Few lenders accept or consider someone else’s income when determining your ability to borrow.
In addition, purchasing a joint property with your parents is the only way to use their income as a servicing guarantee.
How Can You Increase Your Borrowing Capacity?
1. Reduce Debt
Your ability to borrow revenue will significantly increase if you pay off whatever debt you have (or, preferably, minimise any debt you incur initially). Your ability to borrow money will be significantly reduced if you have any debt, usually by a significant number.
2. Spend Less Money
By lowering your monthly expenses and freeing up more of your income for home loan repayment, cutting back on non-essential discretionary spending will help you save money more quickly and improve your loan application.
3. Understand Your Lender’s Consideration
Finally, because each lender has unique regulations and market niches, borrowing capacity can fluctuate dramatically across institutions. Different types of income will be treated differently by each lender. For instance, some lenders may not like casual income, while others may be willing to accept it.
Do Lenders Provide 100% Home Loans?
No. Lenders do not lend 100% of the property value or loan-to-value ratio (LVR) without any prior deposit. You must have a 5% minimum deposit and enough savings to cover moving expenses, legal fees, stamp duty, and other costs.
Contact Finance Corps to Get the Best Borrowing Capacity with Less Risk
If you’re a first-time home buyer, you may feel overwhelmed by the interest rates and other mortgage loan-related issues. At Finance Corps, we can assist you in finding the ideal lender or institution based on your needs, expenses, and lifestyle preferences. Additionally, we can also help you with refinance housing loans and investment loans in Perth. For more information on our services, contact us right away.