Are you ready to buy a house in 2021? The current low mortgage rates make buying a home an attractive proposition.
What do you need if you’re buying a home in Australia? Keep reading, and we’ll fill you in on the details!
Your Current Home
Are you currently living in a home in which you’re paying a mortgage? This can add a level of difficulty to the process of buying a new home since you’ll need a down payment that usually comes from the sale of your home.
It’s not as impossible as some people think to buy a new home when you haven’t sold your current home yet. There are some options, such as borrowing from a pension or even renting out your current home if it’s not selling.
The Down Payment
A good down payment for most homes in Australia is 20%. A 20% down payment for a $300,000 dollar home is $60,000 dollars.
If you don’t have the cash on hand, you can put down less. Most lenders require at least 5% down for a home. It’s not impossible to find home loans for 100% of the home price, but it’s not as common.
Do you want to put down 5% or less? There is a catch, which brings us to our next point.
Lenders Mortgage Insurance (LMI)
If you buy a home with less than a 20% down payment, lenders require mortgage insurance. LMI is not for the borrower’s protection but protects the lender only.
The monthly insurance premium protects the lender against loan default. Why? Because a low down payment makes your loan a higher risk.
If your down payment is 20% or higher, you won’t pay LMI. LMI premiums vary depending on the purchase price of the home and the amount of the loan.
LMI payments are broken down and wrapped into the mortgage and spread throughout the life of the loan. If you refinance later, LMI isn’t portable or transferable to the new loan. If you’re borrowing more than 80% of the home’s value with the refinance, expect to pay LMI again.
Know Your Borrowing Power
Before shopping for a home loan, figure out your borrowing power. Most lenders have calculators that help you determine how much you can afford to borrow.
Don’t overstretch yourself! Leave room in the budget each month for savings in case of an emergency. Also, leave some room for home maintenance costs.
Added Up-Front Costs to Buy a House in 2021
There are a few added costs up front when buying a house. There are solicitor fees, inspection fees, and conveyancer fees. You’ll need about $3,000 to $4,000 dollars for these fees.
Time to Look for a House
Are you ready to buy a house in 2021? Mortgage rates are low and buying a house in 2021 makes sense.
If possible, save enough money for a 20% down payment. Calculate your buying power so you know what you’re dealing with in real terms.
If you can’t save 20%, remember you’ll have LMI costs. Don’t forget to save for added up-front costs too. You’re on your way to owning a home!
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