First home loan
Buying your first home can be a liberating experience but it does have the potential to be quite stressful as well. It's a big step, especially if you've been used to living with your parents, renting rooms when at university, or renting when you are working.
Still, you'll be used to paying money for a home you don't own, so why not put your money towards your own home, which is likely to increase in value over the years?
What is a first home loan?
When you make the decision to buy your first home, the chances are you're going to need to borrow the money to do it. This is where a first home loan can be explored with a range of lenders so that you can get a mortgage for your chosen property. In simple terms, a lender will loan you the money to buy your first home, provided you fulfil certain conditions. These will vary, as all lenders are different, but you should expect to pay a deposit before a mortgage company will agree to advance the money you need. How large a percentage of the overall price that deposit will be depends on the lender, but expect to save up for a while so that you can put down the requested deposit.
How does a first home loan compare to other products?
A first home loan is realistically the only chance at this stage to get onto the property ladder. There are many other loan options available but rarely for the size of this type of purchase. First home loans are, in general, much cheaper in terms of the interest rate charged as opposed to other forms of loan. Mortgage companies want to encourage you to buy your own property and will often offer very reasonable deals. You could fix an interest rate for a period of several years, enabling you to plan your finance during that time without getting a variable fluctuation if interest rates rise.
What are the main features of a first home loan?
When a lender agrees to loan you money for your property purchase, you will sign up to the company's terms and conditions. This may relate to whether or not you can rent the property to someone else at some stage, the regulations regarding the interest rate you will pay, insurances you will require for the building (insuring contents is usually your choice, but it’s sensible to do), and setting up your regular monthly payment. It's a good idea to check all the requirements carefully so that you know exactly what type of contract you are taking on.
Are there risks to consider?
Yes, but there are also potential rewards. Risks include interest rates going up, and if you're on a variable rate, you'll need to source more money every month. If you lose your job and get another one that pays less initially, you could be financially stretched. But if all goes well, your property is likely to increase in value and, when you come to sell, net you a tidy profit.