The prospect of buying your first home is a daunting one. There is so much to consider. Moving logistics. Bills and maintenance. Decoration, bin dates, plumbing, and electrical installations. Not to mention wi-fi, TV, and other luxury technologies you might want to install.
But all of that is superficial to the biggest, and most pressing issue. Finance. How are you going to afford your first home? The property market saw a massive crash some years ago and it has never fully recovered. Gone are the days of getting a home for a few thousand dollars. Now, owning a home seems like a far-off dream to so many people.
And it is at this point you are faced with the daunting prospect of getting a Mortgage. But what exactly is a mortgage? How do they work? And should you get one? Allow us to dive into these questions and help you make this decision.
What Is It?
To put it simply a Mortgage is a loan designed specifically for you to buy a property. The main difference is you never get the money, rather the bank directly pays the real estate agency for the property. To that end, the house you live in is yours, but very technically it belongs to the bank.
This is a very important distinction to be aware of. This is the loophole that allows a bank to foreclose and repossess your possession if you continually fail to make mortgage repayments. Banks make money off loans and mortgages, and if you aren’t paying them, they will make back their money off your stuff.
Don’t panic though. Mortgage repayments are a lot nicer than typical loan repayments. For one, the bank never sets a time frame for you to fully pay it. In theory, you could spend the rest of your life paying off your mortgage as it accumulates interest continually. The bank wants you to pay it slowly, so they get more of you in the long run.
But this means they are willing to work with you to create a repayment plan that fits your budget.
This might not seem important but is it vital you find out what mortgage brokers actually do so you can better understand their tricks and techniques. You don’t want to sign yourself up for a mortgage scheme that will cripple you financially.
Mortgage brokers are the middlemen. They are as many salespeople as they are bankers. They want to sell you the best package they can, to make the most money out of you. So, make sure you are well equipped with some negotiation tricks and keep a clear, focused head when you go to negotiate.
Mortgage brokers will sweet talk you. They will try convincing you that owning a home is the best thing on the planet. Much like a real estate agent, they are master convincers.
Should you get one?
This is the big question. Should you get a mortgage?
This question might seem simple. If you want a house and can’t afford to buy it outright, then, of course, you will want a mortgage. But the question goes deeper than that. Should you even be buying a home?
There are a number of factors to consider. The main one being income. Are you earning enough and consistently to afford mortgage repayments? Keep in mind this is on top of all your other expenditures. Unlike renting an apartment, no bills are included in your mortgage. It is still your responsibility to fund everything. So if you aren’t going to earn enough in the long run, maybe you should consider renting.
Secondly, you need to look at the housing market. You might not think you will ever sell your home, but things change. The area could change and you might not want to stay. The house could encounter issues or an accident could leave you with bad memories of the house.
But with the current state of the housing market, you might find yourself unable to sell. Or, if you can, you might make a loss on your original investment of the property. This can be devastating.
So you will need to do a lot of research. You will want to know how popular units similar to your home are. This will help you better know what homes are worth investing in. You will also need to know how well properties sell in the area you are considering moving to. In real estate, location is everything. So an unpopular area will, of course, put off potential buyers and make it more difficult to shift the property.
Overall, buying your first home is an exciting experience. But it is a huge commitment and one that can’t be undone easily. So take your time to consider if this is the right step for you.
30 August, 2020