First-home buyers are often caught between being practical with a mortgage, or throwing caution to the wind and living like royalty in the moment. When it comes to search for your first home, it’s important to get it right the first time. Join us as we explore the mortgage basics and tips for choosing the right mortgage amount.
When you are taking on a mortgage, you are taking out a loan to purchase a property specifically. Too many borrowers believe that because banks don’t call a mortgage a ‘loan’, it is somehow different at its core. The truth is, you’re taking out money that you will eventually have to pay back.
With that in mind, it’s essential that you know how much you should borrow for a property. Not how much you can borrow, but how much you should borrow.
It can be tempting to max out your bank account, your credit, and your banker’s nerves to get the biggest and best house possible. Is this the smartest thing to do? Most of the time, not really.
The type of mortgage you choose can make a huge difference in the price that you pay. Here are the most common types of home loans and some of their most important characteristics.
The Australian Bureau of Statistics (ABS) found that the average size of a mortgage in Australia as at November 2018 was $384,700.
There was a lot of variation based on location, however. In general, bigger cities create bigger mortgages because people want to be close to convenience, technology, and industry.
Let’s take a look at some of the average mortgages by state, according to ABS:
Averaging out all of the variant rates, the average mortgage repayment in Australia is $1,755 monthly according to the 2016 Census of Population and Housing. Here are the median monthly mortgage repayments by city:
|City||Average Monthly Mortgage Repayment|
Due to this year’s interest rate cuts and price corrections, it has become cheaper to buy than rent an apartment in Sydney. In fact, there are suburbs where mortgage repayments are cheaper than rents.
More people are now considering buying their own homes, and the reason for this is that, as CommSec senior economist Ryan Felsman stated, “Home loans are back to levels of the 1950s. People are sitting on the sidelines, cashed up and ready to go, waiting for the property market to stabilise.”
According to Domain, these are the top places in Sydney where it’s more affordable to buy than rent properties:
|Suburb||Property Type||Weekly Mortgage Repayment||Weekly Rent||Difference between Buying and Renting|
For the complete list of places in Sydney where it’s more affordable to buy than rent properties, check out their article.
Before you sign the papers on any mortgage, make sure that you consider the best practices above. Get the right type of loan, consider how much you have to borrow, and be realistic with your financial situation.
We’ve curated the questions every first-home buyer has asked us. Check out all the answers here. Don’t hesitate to call us when you are ready to talk about getting a mortgage.
Recently, Shore Financial was named the 4th top brokerage in Australia by Mortgage Professional Australia! We could never have done it without our amazing clients. Every day we go to work energised by our mission to help them achieve their goals. So it’s only right to dedicate this recognition to them. Thank you.
Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.