Home Loan Advice: 3 Top Tips

Every cloud has a silver lining and one good thing to come out of the recession is that property has become more affordable. As a result, more and more people are queuing at the bank to apply for home loans. If you’re one of them, here are some Homefair tips on how to secure and manage your home loan.

1. Reduce DebtTo be considered for a home loan, the bank needs to check if you can afford your monthly repayments. Generally, if the repayment is less than a third of your net income even after paying monthly expenses, you’re a good candidate for a loan.
   To increase your chances of being approved, it’s wise to perform your own lifestyle audit. First, find out how much you will need to borrow from the bank. Check the terms available and divide the loan amount by the number of months, adding at least 10% interest.

   From there, deduct fixed monthly expenses from your net income. Expenses can be anything from car installments and insurance to outstanding loans and credit cards. Reduce as much debt as possible to free up more income in order to pass the bank’s affordability test.

2. Clean Up Your RecordCredit checks are standard procedure. The point of checking your other accounts and credit score is to analyse your payment patterns. Whether it is a furniture account or phone contract, a bank can tell how (and if) you will pay them by the way you’ve paid others.

   With this in mind, start cleaning up your credit record by establishing a consistent payment pattern with all your accounts. Do not miss payments no matter how big or small they are. If you have had judgements against you, do your best to comply with the legal requirements.

   If your credit record leaves much to be desired, it might be necessary to partner with someone whose record is more consistent. This can be a spouse, a family member, friend or colleague.

3. Cash is KingAlthough it is perfectly normal to ask for 100% financing, it is advisable not to. Applicants who bring some cash to the table stand a better chance of being granted a home loan. In other words, the less you need to borrow, the more willing banks are to lend.

   Try your best to save at least 10% of the property’s asking price. Depending on the lending institution and loan amount, a bank might ask for up to 30%. Be sure to do your research before visiting a bank to get an idea of how much they might ask for.

At Homefair we firmly believe that if you’re considering applying for a home loan, make sure you are well prepared. In addition to reducing debt, cleaning up your credit record and bringing cash to the negotiating table, make sure that the property you are purchasing is a worthy investment. Our team of experts is ready to help you make your property investment work for you.