How do I know how much I can borrow?
Buyers should strive to accumulate the highest possible deposit to minimise the borrowings and therefore the amount of interest that will eventually be paid.
Most lenders would generally require a borrower to have 20 per cent deposit for owner occupiers but some lenders may be prepared to lend on a lesser deposit depending on the borrower’s financial circumstances and the amount of security that they can offer.
If the deposit is less than 20 per cent, lenders may require the borrower to carry mortgage insurance. Mortgage insurance provides assurance that if the borrower defaults on repayments, the lender will be able to recoup at least 80 per cent of the money which was borrowed.
Mortgage insurance protects a lender against any loss should a borrower default on their home loan. The buyer typically bears the cost of mortgage insurance for the lender.
Buyers should also take into account the potential for interest rates to rise and ensure that they have a buffer which will allow them to continue to make repayments should that occur.
Buyers will incur fees and charges over and above the purchase price of the house. These costs will vary dependent on the purchase price.
Typical on-costs include loan establishment fees and other bank charges, legal fees, stamp duty (usually only for non-first home buyers), transfer duties and home insurance etc.
